The basis of my investment advice is the perspective of past business cycles, how the data develops “data point by data point” to form economic trends and finally how these trends become reflected in market prices. The fundamental concept is simple, but compiling the data and doing the analysis is the bulk of the work. The perspective is an investment history of hundreds of years, but the up-cycle can vary from a few years to longer than 10yrs. The goal is to capture a significant part of the investment up-cycles as long term capital gains and avoid the down-cycles. Importantly: Economic data develops over years. It creeps along! One cannot trade it, but I believe it to be very investible if one has patience and a time frame of 10yrs+.
Retail and Food Service Sales were reported today to a chorus of disappointed commentators. The chart of this data compiled by the Census Bureau is shown below. This chart can be found on the St. Louis Fed site:
I am going to ask you to be the analyst!!
Being an analyst with this data is not difficult. Just look at the trend of the series from its low in early 2009.
Question: Does this trend appear to be slowing down?
Answer: (Yes) or (No)
Take a pencil/pen or just eyeball the chart and draw a smooth trend line thru the data. The actual data is statistical and is thus volatile. Your line should ignore the highs and lows and track the average trend. Select Yes or No above.
The trend tells you the direction of economic activity for the next 6mos or so and it also forecasts the direction of common stocks (SPDR S&P 500 ETF Trust (NYSEARCA:SPY)).
I think the answer is obvious