Ahead of the Curve - Deepstash
Ahead of the Curve

Ahead of the Curve

Joseph H. Ellis

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Most Forecasts Use the Wrong Data

Most Forecasts Use the Wrong Data

Most economic forecasts fail to predict turns in the economy because they rely on the wrong economic indicators and present information in complex, inaccessible ways.

Simply constructing easy-to-read charts that illustrate relationships between different economic factors works much better for making forecasts.

Tracking cause-and-effect historically helps predict it in the future.

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795 reads

JOSEPH H. ELLIS

The best time to sell is when the economy is peaking, which is counterintuitive for many people. People want to believe that the good times are going to keep rolling.

JOSEPH H. ELLIS

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984 reads

Slowing Growth Matters More Than Recession

Slowing Growth Matters More Than Recession

  • Recession is a poor indicator of economic health.
  • Growth slowing significantly causes almost as much damage as an official recession, but doesn't provoke as much concern because it's not negative.
  • The declining rate of economic growth matters more than whether a technical recession occurs.
  • People should pay more attention to slowing growth as a warning sign.

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734 reads

Consumer Spending as the Key Driver

Consumer Spending as the Key Driver

Consumer spending drives most economic activity, so indicators tied directly to spending, like personal incomes and interest rates, make the best predictors of overall economic performance.

Consumer spending leads to production and capital investment, so forecasting it well forecasts other indicators.

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643 reads

Employment Levels Lag the Economy

Employment Levels Lag the Economy

Employment levels actually lag economic changes rather than predicting them. Hiring drops when the economy declines and rises when it improves again.

Look at consumption instead to predict employment, since spending heads upward first. Consumption rising means employment will follow.

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582 reads

Use Relevant Data for Business Forecasts

Use Relevant Data for Business Forecasts

For business forecasting, use economic indicators relevant for your specific products and industry niche, and look at historical performance through business cycles.

Manufacturers can relate consumer spending to their sales categories.

Understand your context instead of overall data.

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544 reads

Interest Rates' Psychological Impacts

Interest Rates' Psychological Impacts

The Federal Reserve's interest rates influence consumer psychology and inflation, but they don't directly determine consumer spending. Their economic impacts are indirect.

People mistake the Fed's attempts to cool down or stimulate growth via rates as linked to spending, but the relationship is not close.

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511 reads

Stock Markets Follow Consumer Spending

Stock Markets Follow Consumer Spending

  • Stock markets are ultimately tied to corporate profits and thus consumer spending.
  • When consumer spending declines, profits and markets follow.
  • Interest rates also affect markets through impacts on spending.
  • Understanding consumer spending helps predict market booms and busts.
  • Falling spending means falling markets.

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496 reads

Timing the Stock Market

Timing the Stock Market

History shows to buy stocks when the economy looks bleak but consumer spending shows signs of improvement.

The best time to sell is when consumer spending and growth peak. This contradicts the instinct to buy when times seem good and sell when worried.

Take the counterintuitive approach.

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502 reads

CURATED BY

sarakelly

Product designer

CURATOR'S NOTE

The book Ahead of the Curve by Joseph Ellis discusses improving economic forecasting by using the right indicators and tracking year-over-year data instead of short-term fluctuations. It argues that recession definitions are overrated, and that slowing growth is more damaging than commonly realized. The book advocates focusing on consumer spending as the main economic driver, and provides guidance on relating indicators like incomes, interest rates and stock markets to spending. It aims to help readers make better forecasts for economies, industries and companies.

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