Transports are a solid economic indicator. As cargo and freight are moving across the country and landing in ports, it is a sign that economic activity is chugging along. Freight shipments starting to slow and eventually declining quarter over quarter has portended economic recession in the past. As you can see in the chart below, there was a sharp drop-off in 2000 which preceded the dot com bust, and though it\u2019s a bit tough to notice, there were two years of declines starting in 2006 that eventually saw a plummet in 2008.<\/p>\n
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Source: Federal Reserve Bank of St. Louis<\/em><\/strong><\/p>\n It\u2019s easy to notice that Transports are currently rising along steadily today, which is a good sign.<\/p>\n The U.S. Department of Transportation\u2019s Bureau of Transportation Statistics\u2019 (BTS) has shown that all but one of the major freight modes grew since the recession that ended in June 2009 with rail intermodal growing the fastest, rising 50.6 percent from June 2009 (the end of the economic recession) to December 2016. Though transports are looking good now, it is important to keep checking back-in frequently.<\/p>\n 2. Leading Economic Indicators<\/strong><\/p>\n The Conference Board Leading Economic Index (LEI) is arguably one of the most underrated macroeconomic metrics\/indicators out there. If you try to find an instance where the LEI was going up and the economy fell into a recession, you wouldn\u2019t find one. Any time the LEI is high and rising, the economy has grown \u2013 plain and simple. It makes sense then that the key elements of the LEI are designed to signal peaks and troughs in the business cycle. It coincidentally looks at factors like manufacturers new orders, building permits, the interest rate spread, weekly claims for unemployment insurance, amongst a few others. These are all indicators that offer forward-<\/em>looking insights into economic activity, versus a metric like GDP that looks backward.<\/p>\n As of this writing, the LEI is high and rising \u2013 another good sign, for now.<\/p>\n 3. The Yield Curve<\/strong><\/p>\n Regular readers have seen me mention the yield curve before, and I do so again to drive home its importance. A flattening yield curve generally tends to indicate that a slowdown lies ahead, and that\u2019s exactly what we\u2019ve been seeing over the last few years. One does not immediately follow the other, however \u2013 on average, the yield curve inverts 16 months prior to an economic recession and 13 months before major stock-market corrections. As you can see below, we are not quite to inversion yet \u2013 the blue line (today\u2019s yield curve) is notably flatter than the orange line (the yield curve at the end of 2010). If the yield curve starts to show signs of inverting, that could be a major warning signal.<\/p>\n <\/p>\n Bottom Line for Investors<\/strong><\/p>\n The question I would challenge investors to ask themselves, is: Are you engaging in the two-part process of 1) analyzing macroeconomic factors and 2) looking at company-specific metrics day-in and day-out in your investment decision-making? If you\u2019re falling short in either category, don\u2019t fret it \u2013 just ask for help! We believe that Zacks Investment Management is a good place to turn. Over decades, we have developed our own databases, models, software, and completely unbiased research to create custom stock and bond portfolios, all \u201cin-house.\u201d\u00a0That has led not only to the longevity of the company but has also placed us in the top rankings out of hundreds of equity managers in the Morningstar Equity Universe. Feel free to reach out to one of our wealth management advisors at 1-800-701-9830 to learn more about how we can help you.<\/p>\n","protected":false},"excerpt":{"rendered":" Making smart, informed investment decisions really involves a two-part process, in my view. The first part is looking at the […]<\/p>\n","protected":false},"author":3,"featured_media":4789,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-6745","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/6745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/comments?post=6745"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/6745\/revisions"}],"predecessor-version":[{"id":8957,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/6745\/revisions\/8957"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media?parent=6745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/categories?post=6745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/tags?post=6745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/zacksim.com\/financial-professionals-insights\/wp-content\/uploads\/2022\/02\/Yield-Curve.png\")
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