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The Means to See the Future

December 6, 2019

Did you know your business has the means to see the future? Tune in to this week's TrendsTalk to learn how reliable leading indicators can objectively show you what’s to come in the economy.

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Transcript by Rev

Brian Beaulieu:
Hi, thanks for joining me for this edition of TrendsTalk. I'm Brian Beaulieu, CEO and Chief Economist of ITR Economics. Appreciate you taking a few minutes out of your day to join us. I want to talk some more about leading indicators. It's not always easy to discern what is going on with them. They seem to slash upward, they flash downward, particularly if you're not looking at the right ones. They can get rather disconcerting or downright confusing. Stock market is one that a lot of people will tend to latch on to and I just want to caution in terms of the stock market. It tends to be the most volatile, gives sway to a news items a lot more than the other ones will. For instance, today being December 3rd, stock market drops 350 points after the president warns that the trade deal with China doesn't look to be all that close.

He may wait until after the 2020 election to try and wrap things up and he slapped some tariffs on France, for instance. So the market reacts badly to that. Tomorrow the market may react totally differently. It may decide that, that's actually good news cause maybe it means the Federal Reserve will lower interest rates yet again. So, you know we don't get too bogged down in the day-to-day machinations. It is one of the indicators we look at of the group of indicators and right now we have eight that have turned up. And, Alan and I will be talking about those and others at the December 17th webinar we're hosting called Prepping For What's Coming Next and that specifically refers to 2020 and a little bit beyond. The other indicators I think are far more important, although we obviously look at the STP pipeline [inaudible 00:02:12] and taking a moment to just talk about that because it is popular anyways.

We're getting positive ready chain signals. You know we have these checking points of cyclical progress and as of the November end-of-month data, we have one 12 of Fry's above the 12th call ready to change, we're three 12 rising above the 12 card change that has upped now for the last two months. So we're going to take some gallon drafts like we did in apparently today, December 3rd. December's typically a weak month though particularly compared to November. If you look at the typical month-to-month percent changes, December doesn't hold a candle to November. If you look at the averages, you'll make up the majority range. December is going to be more volatile and tends to have a bigger spread, particularly on the downside. We may or may not see the ready to change stutter step in December. I don't want to forecast that and all I'm suggesting is that you just keep it in context.

Our optimizer model and this a leading indicator that we developed specifically for the optimizer model is still, as of December 2nd and the first business day of the month, they're still telling us to stay aggressive in the market and that helps me relate to you that, you know, take the broader picture, the other leading indicators are moving upward. The stock market is going to be one that tends to be a little bit more involved to one way or the other. The broader term picture is you and I and anybody else that is moving in concert with GDP in concert with US total industrial production should be planning on a better 2020, particularly in the second half of the year. Key signal to that is the housing market, for instance.

So if you're tied to housing, I hope you're gearing up for a better 2020. After a lagging economic indicator like nonresidential construction, that's going to be spotty in 2020 and some parts where they go in there and slump into 2021. So while I can talk with you about leading indicators, you need to, at the very least, know how you fit with the general economy. [inaudible 00:04:45] to be either GDP or housing or non-residential construction or US industrial production, and track those using the [inaudible 00:04:55] trends report. Better yet, run your own data through rate to change and relate it to the leading indicators there. If you want, we can do that for you.

There's nothing like seeing how the leading indicators can anticipate your company data both on the way up and on the way down to instill confidence in you, particularly through time that this is a great way to be ahead of the curve. I remember the first time I did it way back in the day and I said that, you know, the indications are we're going to be doing better, so let's hire. And I remember we were a very small company at the time and my colleague saying, "Ah, you sure about this Brian? I mean things slip tight out there and certainly our cashflow isn't great." And I said, look, it's going to take six months to train somebody up so we can start making them useful in the marketplace. And by then we are going to be through our low and on our way up.

It's hard worn stripes knowing that this works. It can work for small businesses, it can work for large businesses. I can tell you, like I said, the leading indicators that going up. I can tell you what that means for GDP and generally you can know what that means for your business. If you're really wanting to drive it home, compare your own rate of change to those leading indicators. Compare yourself to some market trends and really see the future before it happens. Maybe that's a big takeaway from this trends, Chuck, you have the means to see the future before it happens, objectively. That's one of the beautiful things about what we do. It is objective. It isn't based on, we hope, we think, it's based on math and observations and probabilities, and it's a nice way to go. See the future, planning for it, prosper in it, up or down, there's ways to make money. Thank you for listening to this Trends Talk. Very much appreciate it. And again, this is Brian Beaulieu, CEO. Keep on calling us for eyecare, economics. Until next time, take care of yourself.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.