Market Behavior and the Economy
Jun 22, 2022
“Why is the stock market behaving this way if the economy is doing something different?” Many often wonder about the correlation between them. Ever heard of economic indicators?
It’s a great question, and fortunately, one that’s been answered before. To find the answer, we’ll need to dust off those economic textbooks of yesteryear and turn to the chapter on “lead, lag, and coincident indicators.”
“Lead indicators” are factors that are used to anticipate what may happen 6-9 months in the future. Think of the stock market as the foremost lead indicator. Now, imagine that the stock prices today are anticipating where the economy will be in 6-9 months. Is it correct? Despite what some may claim, no one knows for sure.
Alternatively, “coincident indicators” attempt to show the state of the economy right now. For example, gasoline deliveries are currently trending higher, consumer confidence appears to have stabilized, and airlines are seeing more bookings. Even the supply of toilet paper seems less of a concern these days, with Google searches for TP falling to near-normal levels.1,2 This may hint at higher consumer confidence at present.
Finally, “lag indicators” provide insight into past economic data. They may confirm long-term trends, but they are not very good at forecasting. The consumer price index is a historically classic example of a lag indicator. It tells us what inflation was, but doesn’t provide much insight about the future.
In general, when trying to evaluate why the markets are behaving a certain way, it may be best to gather as much data as possible. Economic indicators can help provide context for what can often seem counterintuitive behavior, especially in the face of intense global disruption.
Let a team member at Epic Capital know if you’d like to chat about the economy or any other topics you’re pondering. We are here to help.
For more insights and resources, be sure to sign up for our Weekly Market Commentary. Follow our YouTube channel where we regularly post our Epic Market Minute videos. Follow us on LinkedIn, or like us on Facebook. And as always, please don’t hesitate to reach out to a dedicated service professional at Epic Capital.
Tags: financial advisor charlotte nc, Investing, Personal Finance
More Insights
Jul 9, 2025
Few terms in personal finance are as important, or used as frequently, as “risk.” Nevertheless, few terms are as imprecisely defined. Generally, when financial advisors or the media talk about investment risk, their focus is on the historical price volatility of the asset or investment under discussion.
Jul 7, 2025
As Americans get their grills and beach chairs ready for the July 4th holiday, the stock market and the weather across much of the country have both been on heaters. Stocks and bonds continue to effectively navigate a complex policy landscape shaped by evolving trade dynamics, geopolitical tensions, and fiscal stimulus. The market’s resilience in … Continue reading “Market Update – America Gets Record High Stock Prices for Its Birthday”
Jun 20, 2025
Birthdays may seem less important as you grow older. They may not offer the impact of watershed moments such as getting a driver’s license at 16 and voting at 18. But beginning at age 50, there are several key birthdays that can affect your tax situation, health-care eligibility, and retirement benefits.
Jun 18, 2025
During times like these when geopolitical headlines can be unsettling for investors, we at LPL Research like to remind ourselves of one of our key investing principles. Markets have always faced challenges —ranging from geopolitical conflicts and economic downturns to natural disasters, political upheaval and health crises. These events often trigger short-term volatility and shake … Continue reading “Why Long Term Investing Beats Selling in Volatile Times”
Jun 16, 2025
Are you concerned about the inheritance taxes your heirs may have to pay? Then you may want to consider creating charitable lead trusts.
Top of Page
Services
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >
Find us on:
Copyright © 2025 Epic Capital Wealth Management. All Rights Reserved.
Securities offered through LPL Financial. Member FINRA/SIPC.
The LPL Financial representative associated with this website may discuss and/or transact securities business only with residents of the following states: CA, CO, DC, DE, FL, GA, IN, LA, MD, MO, MS, NC, NJ, NY, PA, SC, TN, TX, VA, VT, WA.