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What's the state of the economy?

To help you talk to your clients, we've identified a few key economic and market indicators to help assess the current economic health and trend.

Frequently Asked Questions

What does the dashboard tell me?

• It tells you if the economy is returning to more typical behavior. The dashboard is a snapshot of current conditions in the market relative to their typical-long term ranges.

Can I use the dashboard as a forecasting tool?

• No. The dashboard is not a predictive or market timing tool. The dashboard is intended as a tool for advisors to set context and perspective when evaluating the current state of the economy. It is not meant to serve as a direct prediction regarding the future performance of any economic or financial market. It is not intended to predict or guarantee future investment performance of any sort.

What defines typical?

• The dashboard definition of "typical range" is the range in which 90% of historical observations are most tightly clustered. This range is calculated annually, for each indicator, by analyzing all of the possible continuous ranges containing 90% of historical values and then determining which one of those ranges has the least variation from the mean.
• The typical ranges are based on historical data through December 31, 2008 and include any revisions to historical data. Revised ranges will be published with the January 22, 2010 update.

How should I interpret the chart?

• In simple terms, the chart shows you the relationship of the most recent value to the typical historical range for each of the indicators.
• If the most recent value lies inside the blue band, that indicates more typical behavior for that indicator. If it lies outside, that points to extreme behavior.
• The arrow on the current value shows you if the recent three-month trend is moving toward or away from the typical range.
• The entire range of historical values is represented by the grey bar with the lowest recorded value shown on the left side and the highest recorded value on the right. Values are percentages for all indicators, except VIX, which is quoted in percentage points per annum.
• For more historical context, click the “historical details” links on the left side of the dashboard.

Why are these indicators important?

• In order to monitor the current health of the economy and its trend, we believe it's important to keep an eye on both the broad economy as well as key indicators in the market. Given the improving state of the economy, the fiscal stimulus and the Fed's quantitative easing policy, we have made the following changes to the Dashboard:
  • Added Core inflation – A lagging economic indicator that uses the core Personal Consumption Expenditures Price Index to measure average annualized price increases for American consumers
  • Added Interest rates – A leading market indicator that measures the spread between 3 month Treasury bill yields and 10 year Treasury note yields
  • Removed the TED Spread, though we may continue to mention it in our “Summary of current state”
  The other indicators remain the same:
  • OAS – A market indicator representing corporate credit
  • VIX – A leading market indicator of equity market volatility and investor sentiment
  • Mortgage delinquencies – A key measure of the housing market
  • NF PAY, PCE and GDP – Providing broad context for the overall state of the economy
• More information about each of these indicators is available by following the “historical details” links on the left side of the dashboard.

How often is the dashboard updated?

• The dashboard is updated on the 22nd of every month, using data from FactSet and Bloomberg.
• Each indicator reports month-end data with the exception of GDP and Mortgage Delinquencies, which report quarterly.
• While some of the indicators may be measured daily, we choose to include only the monthly/quarterly numbers, as they are better indicators of the overall economic trend.
• With each update revisions to the historical data may occur.

How can I use the dashboard to talk to my clients?

• You can use the dashboard to show your clients how the current economy, based on these indicators, compares to more historically typical conditions and to show them which direction the market seems to be moving.
• If the top four indicators — the market indicators — are moving toward the typical range, conditions may be improving. Market indicators can provide guidance about what's to come, though they are less accurate than economic indicators.
• The bottom four indicators — the economic indicators — generally tell us what's already happened, and often follow the trend of the market indicators by several quarters. The importance of economic indicators are their ability to confirm that a pattern is occurring or is about to occur.
• Even if the market indicators are moving toward typical, the economic indicators may still be moving away. Historically, the economic indicators have followed the market indicators in coming months.

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