Economists review things like the stock market, inventory levels, and employment to determine which direction the economy is heading.

The stock market and inventory levels are "leading indicators."  That is, they predict what the economy is going to do.  If the stock market is strong it's likely that the economy is stong or is moving in that direction.

The stock market is one of the earliest economic indicators.  It began recovering on March 10, 2009, long before the economy did.

Likewise, if inventory levels are declining, it may be a sign that we're near the end of a recession.  During difficult times, companies try to reduce inventory and the associated costs of maintaining them.  They do this by cutting back on production and, if production is down, so is employment.

The employment (or unemployment) level, on the other hand, is a "lagging indicator."  It tells us what the economy has already done.  When hiring picks up, it's usually a sign that an economic downturn has ended and the economy is feeling strong again.

In the current economy, and especially if you're currently unemployed, watch for inventory levels to fall.  When they get low enough, companies will begin hiring again or they won't have product to sell to customers.  Low inventory levels may be a sign that employment levels are about to increase.

These views are not to be construed as investment advice.  All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy.  Any economic and performance data is historical and not indicative of future results.  Any market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices.  Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.  Please consult Harold Templeton, CFP^® or Sandy Louie for further information (click on "Contact us" above).