hi i'm jimmy in this video we're going to look at the u.s economy we're using a few different
economic indicators to see if we can objectively gauge where the us economy stands today and
hopefully we can use this information to help us make better investment decisions and ideally
get us closer to our goal of achieving financial freedom and towards the end of this video
i'm actually going to share my opinion my personal opinion about the current economy usually i try
to let the numbers do the talking for me but i recognize that sometimes it that can leave us
wanting further thoughts so after we tally up the scorecard i'm going to share my personal opinion
and hopefully that will help guide people as to at least my answer to the question should
we invest now or wait for the stock market to crash again okay so let's jump right in
so we're going to begin with housing starts so this economic indicator is a measure of the number
of new houses being built the theory is that the stronger the economy is the more houses that are
being built and the same is true vice versa that if more houses are being built in theory end up
with a stronger economy thanks to the ripple effect that happens throughout the economy
from a strong housing mark now i've gone back further in this video than i have in
past videos that way we could see what the what housing looked like before the housing bubble
and as we could see here the number of houses being built before the housing bubble burst was
significantly higher than it is today now this may not be too surprising since during that same
time period the period that houses were going up very quickly and being sold fairly quickly well it
was easy to buy a house back then and that's at least part of the reason that the country
ran into the trouble that it ran into and the good news is that since the bottom of the financial
crisis or the housing crisis whatever you want to call it well housing starts have gradually climbed
they've done fairly well for a long time even when covet hit well there was an initial pullback but
then it recovered fairly well which is pretty good for the overall economy so to me this is a good
sign and this should be a point for the bulls so when we shift over to our scorecard here well now
we give a point to the bulls okay simple enough now moving over to the cousin of the housing
starts which is the price of existing home sales once again we're going back to pre-housing bubble
to get a bigger picture perspective of how things were as compared to how they are today and we
started declining the price of housing which once again makes sense since we know that there were
less people buying houses and there were a ton of houses that were built so falling house price
during that time during the bubble the bubble bursting makes a lot of sense but once again
the trend since then has been fairly good now you might see those individual ups and downs during
any given year that's really just seasonality because of course buying homes during certain
times of the year are likely to lead to higher prices since let's say less people want to buy
a house during let's say winter time so you're gonna get some seasonality but overall the trend
has been higher and as we can see most recently well housing prices are once again increasing and
this is likely a positive sign for the overall economy so i think it makes sense again to mark
this down as a point for the bulls since housing prices appear to be heading in the right direction
so far this scorecard here this is the same as it was in last month's analysis but don't worry we
actually have a couple changes coming up but for now let's shift over to initial jobless claims
and i'm sure we could have all guessed that initial jobless claims does not look all that
great and yes i'm thrilled that the weekly number appears to be heading in a lower direction now i
was curious how coveted compared to the financial crisis also known as the great recession or the
housing bubble whatever you want to call it 0809 that time period this is the way that chart looks
so we can see that the current spike towers over the previous peak from the financial crisis in
fact the worst week in the financial crisis there were 665 000 new jobless claims filed and if we
switch back to the current more short-term chart well we can see that the current number is 751 000
new new jobless claims for the most recent week and the peak was up near 7 million now of course
covid was a bit different but overall this is still a terrible thing and just to keep this video
moving on at a reasonable pace when we switch over to unemployment well clearly 7.9 unemployment
is also a very negative point so this is going to be a negative sign for the whole economy now
for curious unemployment at the peak of the financial crisis was higher than it is today
and it declined more slowly than it is declining right now so there's got to be something to be
said for that but either way when we switch over to our scorecard here well on the scorecard i
think it makes sense to give both of these points to the bears since these are negative signs for
the overall economy okay now moving over to the baltic dry index the baltic dry index
tracks the cost of transporting raw materials so generally these are products that are used
in the manufacturing process and we'll come to manufacturing in a minute but as we can see here
well the baltic dry index has recently dropped and this is a negative thing now the theory here
is that as the price prices fall on the baltic dry index as demand begins to fall so we can see with
the coronavirus when that happened there was a big drop in the baltic dry index because it was
very little demand since many many manufacturing plants around the world began to shut down so we
head over to our scorecard here well last month we actually had this as a positive point for the
bulls but since the baltic dry index appears to be getting stuck at the lower end of the current
range frankly it makes me a bit nervous so actually i think it makes more sense for
this month to make this one a neutral point so we got a point for the bulls and for the bears
okay now moving over to a related industry in manufacturing this is the ism manufacturing index
and basically the most important level for us to remember with this index is 50. anything above 50
implies that the manufacturer manufacturing sector is growing anything below 50 implies that there is
negative growth so we want that indicator to be above 50 which it is right now so at this
point it looks pretty good and this is going to be a point for the bulls now it's very possible
if the baltic dry index continues to get worse that could be because one indicator is leading
the other i actually think the baltic dry index is more of a leading indicator so it's possible that
manufacturing sees a pullback but for now just taking the data for what it's worth i think that
it makes sense to give this point to the bulls since right now it looks like manufacturing is
growing okay so now we're going to look at the fed funds rate or really the federal reserve
as a whole so as we can see interest rates are extraordinarily low right now lower than they've
ever been before and this one's really a tricky one i know i've said this before but it's a very
tricky thing to try to quantify because are low interest rates a good thing or a bad thing
on one hand low interest rates are very good because the purpose of lowering interest rates
is to stimulate the economy so we expect for that to happen
but on the other hand if they are too low for too long at what point is it a problem now we can see
that the federal reserve kept its interest rates low for a long time after the financial crisis
and then the economy actually did okay so that does imply the economy can survive down at these
levels but for how long we had to return to it pretty quickly coming off of the previous very
low numbers so again i hate to cop out of this one but i think we're going to have to go with a
neutral point here because i could easily make the case in either direction okay now we're shifting
over to consumer confidence so last month we had consumer confidence as a negative point
and i think we could keep it as a negative point if we wanted to but i'm thinking that the more
recent growth in consumer confidence i think that consumer confidence is improving and this might
be a positive sign for the overall economy so i think it's time for us to move consumer confidence
from a negative point to a neutral point okay so on our scorecard here well if we're looking at our
scorecard i would say that broadly speaking it looks like the economy is fairly neutral
but in my mind i'm actually quite nervous about the economy at this point and quite nervous about
the stock market i recognize that there are some positive points about the overall economy
and that it's very possible that the economy keeps growing albeit likely at a gradual pace
but it's possible that things take a nosedive or at least the stock market takes in nosedive this
past week has not been a great week for the stock market and you know it seems deserved there seems
to be a disconnect between the stock market and the current economic situation even if we want to
say that this is neutral why is the stock market done so well that overall makes me nervous when
it comes to it from an investing standpoint now to answer the question do we invest now or wait for
a stock market crash well for me i have to stick with what has been somewhat of my long-standing
approach to this and that is that i think it makes sense to continue to strategically invest
if it were me i would not be going on i personally won't go out and buy let's say a broad-based etf
something like an etf tracking the S&P 500 SPY or VOO something like that i wouldn't go out and buy
those right now because i think that the risk is high that this stock market as in general
could pull back but i do think it makes sense to continue to identify individual opportunities
that could do well over the long run so for me that's the smartest place to invest right now
of course the exception to this is dollar cost averaging which is when we consistently invest
the same amount of money at a consistent period of time so every month every quarter every year
whatever it is we consistently invest the same amount of money over and over
to me that makes lots of sense and no matter where those investments are going i would keep
doing that i think that's very smart in general but if we're going to pick individual investments
i personally like the idea of picking individual stocks or perhaps individual sector etfs that
perhaps have a value perspective to them right now now we might ask does this type of analysis
even work is it worth our time to do this type of analysis sure it's interesting to look at but
does it really work well i actually did a video where i performed that exact analysis and i did
this same type of analysis before the financial crisis so at the very peak of the stock market
if we had done this analysis then how reliably would this have guided us that things were bad
or about to get bad so for curious perhaps that is a good next video for you to watch i got a
link right here i got a link in the description below and thank you so much for stick with me all
the way to the end i really do appreciate it thanks and i'll see in the next video