INNOCENTLY, YOU GO ONLINE.
You browse, you surf, you scan.
Before you know it, you’re lost
deep in cyberspace. Just like Tom
Hanks stranded in an uninhabited
island in the movie Cast Away,
with nothing but remnants of a
crashed plane and what’s left of
the packages in the plane’s cargo.
Where am I? How did I get here?
And more important, how do I get
out of here? You try to send out
flare signals, you attempt to build
a raft, but nothing works and you
end up feeling lost and helpless.
The markets aren’t all that
JUST ASK FRED
different. There’re so many data
points that you don’t know which
ones to use. You’re confident
about when earnings and eco-
nomic data will be released, but
you have no idea how the mar-
kets will react to that data. The
markets can feel random, and
finding your way in that random-
ness can be a challenge. Add in
all the competing opinions about
how to beat the markets, and you
can find yourself tangled in the
“unknowing,” where any trade
at all gets confusing, and staring
at the screen becomes a popular
pastime. But escaping from the
market’s daily chaos is possible
and desirable. All you need is a
plan. And a review of a few trust-
Every day, a myriad of market and trading
data info bites can drag markets up or down.
The good news? For a wealth of information, you can access the Federal Reserve
Bank’s massive economic database called
“FRED” on the thinkorswim® platform from
TD Ameritrade. But with so many factoids in
one place, it’s easy to feel lost and not know
how to get back home. Go in with a plan.
Above all, used properly, FRED can help you
create a strategy to tackle the market with a
tad more certainty. Some economic indicators are more important than others. Let’s
start off with four that will keep you engaged
with the market, help you find possible
trading opportunities, and get you to back to
familiar territory sooner rather than later.
Gross domestic product (GDP). This is an
important number that gives you a snapshot
of the health of the economy. GDP can reveal
the pace at which the economy is growing.
Simply put, if GDP is up,
people often feel good, they
spend more, and that can be
positive for equities. With
a lower GDP, traders tend
to move to bonds. Typically,
GDP data affects broad mar-
ket indices and blue-chip stocks, especially in
the manufacturing and transportation sectors.
Keep in mind that GDP is revised constantly,
so by the time you get the data, it’s most likely
going to lag the price movement of stocks.
Housing data. Here you’ll get a handle
on whether consumer confidence, which
churns the economy, is strong. Housing
data comes in lots of shapes and sizes. You
can review existing home sales, the S&P
Case-Shiller U.S. National Home Price
Index, the FHFA House Price Index, new
home sales, and more. So, for instance, if
existing home sales are up, especially if
they’re higher than what Wall Street expected, it’s possible broader markets will move
to the upside. Stocks of building-material
companies, construction companies, and
homebuilders are likely to be impacted by
Jobs data. This one’s a no-brainer—strong
jobs numbers are generally a good indicator
of a healthy economy. Important jobs data
includes total employment figures and the
unemployment rate. In this category, the
monthly employment report for non-farm
payroll is essential. A big surprise in any
of these numbers could move prices up
or down. Small-caps, banks, and financial
stocks are often affected by jobs data.
FIGURE 2: Oh, so organized. With so much available data, it’s a good idea to have
a game plan. Figure out which information is important to you and go from there.
Source: thinkorswim by TD Ameritrade. For illustrative purposes only.
FIGURE 1: Pencil it in. When will retail sales be released? Employment data?