hi I'm Jimmy in this video we're gonna walk through a quick review of where the
u.s. economy stands we're using different economic indicators to see if
we can objectively gauge where the US economy stands today the goal is to see
if we can get a enough of a big-picture view of the overall economy trying to
help us determine should we invest now or wait for the stock market to crash
and ideally this will help us make a better investment decision and get us
closer to our goal of achieving financial freedom
okay so let's jump in so I'm gonna try to use the same economic indicators as
we did last month so we can get a better way to compare one analysis to another
so if you know of any good leading economic indicators that I don't review
in this video please put them in the comments below
so I could try to incorporate them into the next video okay so first up we've
got the S&P 500 now I'm not gonna use this on our economic scorecard I just
wanted to illustrate how well the stock market's been doing right
recently and I also want to point out this hesitation here in the past month
or two and as we could guess this is largely due to the reaction from the
coronavirus now I think it's worth noting and probably obvious that the
coronavirus has had a bigger impact on the Chinese stock market this is the
Shanghai Stock Exchange index and clearly they've had a big dip recently
although it does look like they've had a decent bounce off of the bottom so
clearly the coronavirus is something we're gonna want to watch as it's always
possible that some sort of Black Swan event like this could be the reason that
the first world economic Domino were to start falling it could be the initial
cause of the falling of all of the different major economies so I think
it's important that we acknowledge that this is out there this is a big
potential negative so this is something we're gonna want to watch the longer
this drags out the bigger the potential problem we could have okay now let's
jump to our first indicator first up we have the yield curve or more exactly the
inverted yield curve so this is the inverted yield curve this is the yield
curve when did inverter just a few weeks ago at the end of January now we know
this yield curve is inverted because the short-term interest rates are higher
than the long-term into straights in this case we have the
three-month is higher than both the five-year and the ten-year interest
rates and this is a bad thing this is a bad sign for the overall economy this is
clearly gonna be a point for the Bears since historically all recessions in the
United States have been preceded by an inverted yield curve and this isn't the
only example of an inversion of the yield curve that we've seen we had a few
of them happened last year so clearly the inverted yield curve is
something that is looming over the United States or the US economy and this
could be a bad sign in the not-too-distant future so we jump over
to our economic scorecard well right now the Bears get one point for the
inversion of the yield curve next up we have manufacturing now this is the is M
manufacturing PMI indicator and this has clearly been a negative point for the
Bears since about the second half of 2019 when it was clearly it was this
fall that we were watching as you were watching that fall where you became more
wary of it and then in the past couple months
well when the manufacturing index fell below the 50 level this became a real
problem 50 is an important level for this indicator because anything below 50
implies negative growth in the manufacturing sector anything above 50
even when it was falling implied that growth was slowing but it wasn't
negative a total drop below 50 but clearly we can see that in January the
number jumped back above the 50 level now I don't want to overreact to this
too soon I wouldn't want to call this a positive sign because we've had one
month where it's been above it but the fact that there is now again growth in
the manufacturing sector could be a good thing so I think it moe I think it makes
the most sense when we switch back to the scorecard to give this one a neutral
point because as of right now I think it's too soon to say it's a positive but
at least it stopped falling and not only did it stop falling the sector started
growing again so overall I think we got to give a neutral point for this one one
point for the bull and the Bears this is gonna be an important one for us to
watch over the next few months okay next up we have two indicators on a way we
can track how late consumers are as far as their
payments how late are they with their payments on some big purchases first we
have auto loans so as we can see with this chart we can see that there's a
larger percentage of people that are 90 days or more late on their auto loans
now this indicator is updated quarterly so December is the last number that we
have but the fact that more people are late on their auto loans is clearly a
bad thing and this is gonna be a point for the Bears then when we switch this
chart over to the percentage of people 90 days or more late on their mortgages
well much to my surprise this held up a lot better than I would have expected
sure there was a slight uptick in the past quarter or two but nothing too
significant relative to how bad it got in the wake of the Great Recession so
overall when we jump back to the scorecard well with these two I think it
makes sense to give a point to the Bears for the auto loans clearly that's a
negative sign but for the mortgages I think it makes sense to give them a
point to the Bulls since mortgages are doing pretty good
right now at least people aren't there are too late on their mortgages which
makes sense you're more likely to pay your mortgage than you are your car if
you're running into financial trouble that's something you could afford it
okay now we're jumping over to consumer confidence now consumer confidence has
been a point for the Bulls for a while and if we look at the most recent
numbers to January numbers well they came in right near the highs for the
consumer confidence so overall the fact that consumer
confidence is sticking up this high is likely to be a good sign for consumers
in general and maybe if we were to think about this from the mortgage perspective
I guess in hindsight consumer confidence numbers being good as they have been for
a while now well I guess it would make sense that if more people were being
laid on their mortgages then I'm guessing consumer confidence would fall
so these numbers are likely to be tied to each other so I probably shouldn't
have been surprised that mortgages were doing okay which explains why consumers
broadly speaking are fairly confident okay so on our scorecard we got a
bullish point for the consumer confidence
okay now we're sliding down to a similar economic indicator in CEO confidence now
much like consumer confidence C confidence has proven to be a decent
economic indicator as far as predicting what's to come in the economy and I was
torn with this particular chart clearly relative to the Great Recession it's
looking pretty good but the last time I did this video I actually gave it a
point to the Bears since over the past year it has been trending lower now if
we were to zoom into that part a little bit well we can see that the January
number came out and it's possible that CEO confidence it looks to be red at the
higher the higher end of that trend lower but it's possible it breaks higher
but once again I think it makes sense to stick with a point for the Bears since
the fact that conceal confidence seems to be trending lower over the past year
to me would you know it's it's it's a warning sign something that we should be
watching so right now I want to stick with it up with a point for the Bears
but let me know if you would do it differently okay now we're jumping over
to housing starts clearly this economic indicator looks good as many new houses
seem to be being built and clearly we saw a spike in this indicator very
recently now the theory behind housing starts being in a good thing for the
economy is that more people buy houses when more people are confident in the
overall economy the more people that buy houses the more houses that they built
that's how you get this number moving higher so on the scorecard clearly
that's a point for the bolts now when we're looking at the scorecard it's not
too far off this month than it was last month it split about 50/50 right now and
I think that's a fair assessment of the economy it's very possible we're in an
election year right now it's very possible this thing runs for all of 2020
perhaps we have a pullback in 2021 and there's enough warning signs that
something could be around the corner overall I'd say that I'm fairly
confident with the economy and I think it makes sense to continue to invest
among our money as consistently as possible I'm a big fan of dollar cost
averaging and I think that if I had a choice of investing now or weighting
well as I've said for the past year I think it continues to make sense to
continue to invest albeit defensively I think it I think there
enough warning signs that it makes sense to stay defensive now I have been asked
a few times does this type of economic analysis really work and just recently I
did a video on where I went back to the Great Recession right at the peak right
before the Great Recession happened and I did this same type of analysis with
these very same indicators and I wanted to see whether or not this would
actually work this is what that video was if you're curious this could be a
good next video watch if you're curious what it would have looked like before
the Great Recession well we really have had warning that the S&P was about to
tank if you're curious there's a link here there's a link in
the description below and I want to thank you for stick with me all the way
into the video I really appreciate it I'll see you in the next video