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United States Fundamantals And Analysis

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Fundamentals are the roots, bones, framework upon which the market rests. We use technical analysis to trade, but it is nothing more than an xray into the beast. More factors go into the churning US economy than can be counted in one forum thread, blog post or article. This thread is meant to be center of discussion into what is driving the US market.

Fundamental

  • – noun - a central or primary rule or principle on which something is based
  • -adjective - forming a necessary base or core; of central importance

By definition fundamentals are the primary forces at the core of the economy and are of central importance to it. These include labor trends, manufacturing, services, construction, technology, politics, financial policies and many many others. The way we track these fundamentals is through economic data. Data is revealed on a point by point basis and is summed up in what are referred to as “macro-economic indicators”. The most commonly tracked is GDP, gross domestic product, which is the sum total of all economic activity within a nation.

Others that are important to track and that have more day to day impact on the market include the Kansas City Fed Index of Labor Market Conditions. This is an index of 24 top gauges of employment including weekly jobless claims, planned lay-offs, job creation, unemployment rate, job openings and quits. On the manufacturing front are the regional Federal Reserve Banks who track industry in their regions. These gauges are based on surveys of conditions and reported monthly.

Central banks are also key to fundamentals and the FOMC is the one to watch when it comes to the US. The central banks controls the amount of money that banks are charged, and are allowed to charge each other, as well as the amount of money circulating in the economy. Both very important when it comes to business and the economy.

The reason we want to keep up with the fundamentals, and more importantly changes to fundamentals, is because they set up the market. If you have ever heard the market referred to as an ocean in which you watch the tides, measure the waves and trade the ripples the fundamentals represent the ocean itself. Within the ocean are tides that affect business conditions, market sentiment, earning and the economy. These are the ripples that we want to trade.

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Michael Zane's picture

US Fundamental Outlook

The US is fundamentally sound at this time. The economy has been in a long term recovery, built on loose FOMC policy, and is now able to support itself. The FOMC has indicated in their meeting that the economy is strong enough that an interest rate hike is the next move but not exactly when that move is going to be. Best estimates place the rate hike in the June-September period of 2015.

The current recovery, or stage in the recovery, is built on labor. Labor trends have been improving for over 5 years and are now trending at their best levels. The KC Fed Index of labor market conditions shows that the market continues to improve from historic low levels with strong momentum. This will no doubt turn into improvements in housing and the consumer which are expected later this year. If trends play out as expected the FOMC is likely to increase rates sooner rather than later.

Michael Zane
Michael Zane's picture

Kansas City Fed LMCI

Michael Zane
Michael Zane's picture

Industrial Output rises once again, the spring expansion is underway.

us industrial activity rises

Michael Zane