Economic Indicators and their Impacts on Financial Markets

Duration:
2 days
Location:
Prague, NH Hotel Prague
  • Introduction to Economic Indicators
  • Macroeconomics and Financial Markets
  • Importance of Fiscal and Monetary Policy for Financial Markets
  • Overview of Economic Indicators and their Uses
  • Leading Economic Indicators and their Effects on Financial Markets
  • Coincident Economic Indicators and their Effects on Financial Markets
  • Lagging Economic Indicators and their Effects on Financial Markets
  • Economic Integration and Global Financial Markets
The purpose of this seminar is to give you a good understanding of economic indicators and of their practical uses in investment decision making and portfolio management.

We start with a brief introduction to economic indicators and explain their importance for financial decision making. We continue to look at the macroeconomics behind the numbers. We review and analyse modern macroeconomics from the perspective of the financial community, focusing on important issues such as growth, business cycles, inflation expectations, interest rates, trade and balance of payments deficits, government deficits etc. We also explain how fiscal and monetary policies are used as stabilization tools and discuss how these policies can affect the broad financial markets and market values of different asset classes.

We then take a closer look at how trends and cyclical behaviour of economic variables are reflected in various economic indicators. We give an overview of the different types of economic indicators and explain how they are classified according to direction (procyclical, countercyclical or acyclical) and timing (leading, coincident or lagging variable). Further, we look in more detail at examples of the various types of indicators, including "hours of production workers in manufacturing", "new claims for unemployment insurance" (leading indicators), "index of industrial production", "personal income", and "value of new orders for consumer goods" (coincidental indicators), and "unemployment rate" (lagging indicator). We will go LIVE to follow the release of some of these indicators during the seminar!

In each case, we explain how the indicators should be interpreted, and we discuss how the release of new economic data can impact the value of financial instruments and investment projects. We also demonstrate how regression analysis can be used as a practical tool in conjunction with economic indicators and modelling to forecast industrial production, consumer spending and other important variables, and to identify linkages between various indicators. Further, we show how factor models can be used to estimate the effect on stock prices, interest rates and exchange rates of changes in these economic variables. We also give practical examples of possible profitable investment strategies based on the effects of forecasted/expected changes in economic indicators.

09.15 - 12.00 Introduction to Economic Indicators

  • What Is an Economic Indicator, and Why Are they Important?
  • Types of Economic Indicators
    • Leading, Lagging, Coincident
    • Procyclical, Countercyclical, Acyclical
    • Composite and Diffusion Indexes
  • Overview of Domestic and International Indicator Indexes
  • Linkages between Economic Indicators
  • Overview of the Practical Uses of Economic Indicators

Understanding the Macroeconomics behind the Indicators

  • Getting Macroeconomics in Perspective
  • Alternative Measures for Output and Income
  • Economic Fluctuations, Unemployment and Inflation
  • Government Deficits and Interest Rates
  • Balance of Payments and Exchange Rates
  • Fiscal and Monetary Policies and their Impacts on the Financial Markets

12.00 - 13.00 Lunch

13.00 - 16.30 Leading Indicators and their Importance to Financial Markets

  • Important Indexes of Leading Indicators
    • The Conference Board (US)
    • OECD's Composite Leading Indicator for the G7 Economies
    • The ECRI Index
  • Closer look at the Individual Leading Indicators
    • Stock Prices and Stock Market Returns
    • Average Weekly Hours
    • New Orders
    • Money Supply
    • Housing Permits
    • Philly Fed and ISM
    • Consumer Spending and Confidence
    • Interest Rate Spreads (Yield Curve)
  • Other Leading Indicators
  • Forecasting Recessions Using Leading Economic Indicators
  • Interpreting Declines in the Leading Index: The Three Dís
  • Investment Implications
    • How the Release of New Economic Data Can Impact the Value of Financial Instruments and Investment Projects
  • Cautions and Conclusions about Leading Indicators
  • Small Exercises

Day Two

09.00 - 09.15 Brief Recap

09.15 - 12.00 Coincident Indicators and their Importance to Financial Markets

  • Industrial Production
    • Real and Nominal GDP, Volume of Sales of the Manufacturing and Wholesale-Retail Sectors, Durable Goods Orders, Factory Orders
    • Practical Investment Implications of Industrial Production Indicators
    • Examples of Investment Strategies of (Changing) Industrial Production Indicators
  • Employment
    • Employment Situation, Weekly Claims for Unemployment Insurance, Help-Wanted Advertising Index, Corporate Layoff Announcements, Mass Layoff Statistics (MLS)
    • Practical Investment Implications of Employment Indicators
    • Examples of Investment Strategies to Exploit (Changing) Employment Indicators
  • Other Coincident Indicators
    • Personal Income and Spending
    • New and Existing Home Sales
    • Practical Investment Implications and Examples of Investment Strategies
  • Small Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Lagging Indicators and their Importance to Financial Markets

  • Unemployment
  • Cost of Doing Business
    • Inventory-Sales Ratios
    • Prices, Productivity, Wages, Employment Cost Index
  • Consumer and Social Costs
    • Ratio of Instalment Credit Outstanding to Personal Income
    • Percentage Change in CPI
    • Average Duration of Unemployment
  • Other Lagging Indicators
  • Practical Investment Implications of Changing Lagging Indicators
    • Understanding the Behaviour of the Economy
    • Examples of Investment Strategies that Are Based Upon the Analysis of Lagging Indicators
  • Small Exercises

Outlook: Economic Integration and Global Financial Markets

  • Where is the Global Economy Heading?
  • What will be the Impact on Global and Local Financial Markets?
  • Taking the Pulse of the Global Economy by Looking at Economic Indicators

Summary, Evaluation and Termination of the Seminar

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