property of ctl business solutions sdn. bhd 1 economic indicators and indices by mike lee cfp, rfp,...
TRANSCRIPT
Property of CTL Business Solutions Sdn. Bhd
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Economic Indicators and Indices
By Mike Lee CFP, RFP, FCIS, MCIM
(Licensed Financial Planner)
No. CMSRL/A3201/2007
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Some Economic Indicators
Money Supply / Liquidity Gross Domestic Product / Income Interest Rate / Interest rate cycle Economic Indices – Leading, Coincidental and Lagging Trade Surplus / Bank Negara Reserves Economic / Business Cycle What is Inflation / Deflation / Stagflation? The Baltic Exchange Dry Index The Volatility Index (VIX) or “Fear” Index The US Dollar Index
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4 Possible Trends in a Recovery
QuickRecovery
DoubleBottom
GradualRecovery
SlowRecovery
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What is Inflation?
Demand exceeds Supply? Too much money chasing too few goods? Money is what money does? Costs of goods and services go up? Value of money goes down?
“The rate at which the general level of prices for goods and services are rising, and subsequently, the purchasing power of money is falling” - Investopedia
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What is Stagflation?
Two words – ‘Stagnant economy & Inflation’
“A condition of slow economic growth and high unemployment – a time of stagnation, followed by high prices and inflation” - Investopedia
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Are economic indicators always beneficial or relevant?
It depends on what is happening in the country and the world. Generally,
economic indicators provide a good guide and direction for planning
purposes.
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Market Change After Crisis(Dow Jones Industrial Index)
Event Reaction Date
Market
Drop1 mth 2 mths 3 mths 8 mths
Iraq invades Kuwait
02 – 23 Aug 1990
-12.6% -0.30% 3.10% 18.9% 23.6%
Gulf War 16 – 17 Jan 1991
3.7% 11.5% 16.2% 16.2% 28.2%
Asian Financial Crisis
07 – 27 Oct 1997
-10.8% 10.8% 11.8% 23.7% 22.1%
US 911 Terror 10 – 21 Sep 2001
-11.6% 14.4% 18.5% 18.9% -12.7%
US-led War against Iraq
20 – 31 Mar 2003
-3.5% 7.5% 9.2% 13.1% 20.4%
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Asset Class(Gold Index)
• Gold Coins, jewelry etc.
• Gold Funds (mining stocks)
• Gold ETFs
• Gold Certificates (banks)
• Others
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22.9
Market is down-Be greedy when others are fearful?
Market is up-Be fearful when others are greedy?
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Reversion to the mean
• The Pendulum Swings both ways equally
• What goes down must come up again and vice versa