Do the leading indicators anticipate the economy? October 25, 2016 – Posted in: analyses, posts
The leading indicators are measurable economic factors that change before the economy starts to follow a particular pattern or trend. However, the rate of shares can constitute the leading indicator itself. It doesn’t mean that the leading indicators are useless for the investors. They use them to confirm sustainability of trends in the economy. If an increase in prices of shares is accompanied by a growth of leading indicators, it probably means that the economy is affected by the bull market. Too high leading indicators may be the symptoms of the overheating. The investors should be careful. The decrease of the leading indicators is incidental to the bear market. The leading indicators are below the limit value and it usually brings the economic expansion. Extremely low leading indicators reflect market pessimism but such moment may be favourable to buying shares.