Economic Indicators Dashboard – February 2015 update

The most recent updates to the U.S. economic and market indicators we track in the Economic Indicators Dashboard support the notion of a stabilized domestic economy. Only two indicators—the 10-year U.S. Treasury Yield and inflation—fell below their typical historical range in February. Economic expansion and consumer sentiment also showed some noteworthy trends. Economic Indicators Dashboard Accessed 3/18/2015 How do I read this chart? This dashboard is intended as a tool to set context and perspective when evaluating the current state of the economy. For each indicator, the horizontal bar shows four things.
  • A blue color band represents the typical range for this indicator. +/- 1 standard deviation of historical values for the indicator fall in this range.
  • An orange marker shows the most recent value – the closer the marker is to the blue bar, the closer it is to historically typical conditions.
  • A grey area outside of the blue band which shows the range actual conditions.
  • An arrow shows the most recent three-month trend indicating if it is moving toward or away from the typical range

10 Yr. U.S. Treasury Yield

Despite widespread belief that the 10 Yr. U.S. Treasury yield had no place else to go but up, it fell to 1.99% at the end of February. As the economy continues to stabilize, and the Fed signals the potential for rate rises later this year, we are likely to see the U.S. Treasury yield finally rise. Investors may be well served by reassessing their portfolios to make sure they have adequate diversification, and are not concentrated in any one sector or investment.

Inflation

The combination of low Treasury yields and cheap energy prices continues to keep inflation at exceptionally low levels. Although the low yields may have been painful to investors relying on fixed income payouts, at least inflation does not appear to have unduly eroded the purchasing power of those historically low coupons. A far worse scenario would have been low yields coupled with high inflation—causing investors to lose significant purchasing power over time.
Economic expansion
The most recently reported quarterly GDP growth number is 2.2% from December 2014. Although lower than the 5% growth reported the previous quarter, in part due to lower government spending, this should not unduly alarm investors. GDP growth numbers regularly vary quarter-to-quarter while following longer trends. Russell’s market strategists anticipate 3% GDP growth in 2015.
Consumer sentiment
Perhaps most indicative of the relative economic calm is the still-high consumer sentiment. This metric is based on surveys tallying the degree of optimism consumers have for the general economy and their personal financial circumstances. It rapidly increased month-over-month from 81.8 last July to a peak of 98.10 as of January. Although it slipped slightly in February, to 95.4, it remains in the upper end of its typical historical range.

The bottom line

Despite the news headlines sounding alarms about slumping oil prices, the economic risks of a strong U.S. dollar and scattered political worries around the globe, the U.S. economy appears to be in a healthy position. Most investors are best served by taking a long-term portfolio view and not making tactical market-timing decisions. As such, these recent economic and market metrics are good news.
Standard Deviation is a statistical measure that reflects the degree to which an individual value in distribution tends to vary from the mean of the distribution. Standard Deviation is a useful tool in measuring the historical typical range as 1 Standard Deviation includes approximately 68% of the historical values in a normal distribution. Using this measurement allows us to exclude the more extreme values which would not be as probable to see from the indicator. Data stated is historical and not a guarantee of future results.Data displayed in the Economic Indicators Dashboard are reflective of current data as provided by the data sources including any revisions to previous data. These revisions may change historic data points and historic ranges for some or all indicators. These changes are usually due to seasonal adjustments to previously supplied data. The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. It is not intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Anyone using this material should consult with their own attorney, accountant, financial or tax or consultants on whom they rely for investment advice specific to their own circumstances. Indexes are unmanaged and cannot be invested in directly.Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell Investments is a trade name and registered trademark of Frank Russell Company, a Washington USA corporation, which operates through subsidiaries worldwide, including Russell Financial Services, Inc., member FINRA. Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management. Copyright © Russell Investments 2015. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty. RFS 14752
Site preferences