Tasseography practitioners read tea leaves to forecast the future. Some economic data serve a similar purpose. Policymakers, central bankers, economists, and investors look at leading economic indicators to forecast where the economy may be headed. Classic leading indicators include:

Consumer confidence. Consumer spending is the largest contributor to economic growth in the United States. When consumers feel confident about their finances, the economy may continue to grow, and vice versa.

The slope of the yield curve. When yields for short-term U.S. Treasuries are higher than yields for long-term U.S. Treasuries, then a recession may be ahead. "Yield curve inversions have preceded each of the last eight recessions," reported the Federal Reserve Bank of Cleveland.

Stock market performance. Since investors make decisions based on how they believe the earnings of companies and the value of companies' stocks will change over time, a rising or falling stock market is considered to offer insight to where the economy may be headed.

"The leading indicators for the U.S. economy fell in April for the second month in a row…The leading index declined mainly because of weaker business orders, fewer permits to build new homes and a decline in stock prices last month. Stocks have since rebounded, however, to fresh record highs," reported Jeffry Bartash of MarketWatch. "The economy slowed in the first quarter after heady growth in the second half of 2023. It's unlikely to speed up much until inflation tapers off and the Federal Reserve cuts interest rates."

Some analysts believe rate cuts are still on the table for 2024, reported Sam Meredith of CNBC. Last week, the Consumer Price Index showed headline inflation (which measures price changes for a fixed basket of goods) and core inflation (which removes food and energy from the basket) both moved lower from March to April.

Investors found a lot to like in the inflation data. U.S. stocks finished the week higher with the Dow Jones Industrial Average closing above 40,000. Yields on most maturities of U.S. Treasuries moved lower over the week, lifting bond prices.

For more information on how to be financially prepared, contact our office at (405) 340-1717 or email greg@womackadvisers.com 

Greg Womack

1366 E. 15^th Street

Edmond, OK 73013

Phone: (405) 340-1717

www.womackadvisers.com