The Leading Indicators
By: David Smyth, May 29, 2014
I recently attended a conference in which Zach Karabell, author of “The Leading Indicators” spoke. Karabell is an economist who has a very interesting perspective on how we measure and predict the future of today’s economy. According to his book, Karabell believes that we may be putting too much stock in the indicators we use to make assumptions about the market and our finances. Thanks to today’s media, we are constantly made aware of measurements such as unemployment rates, GDP, and inflation, and how they can help predict future growth or shrinkage. But we rarely stop to think about where these numbers come from, or if they’re even relevant. Karabell’s book makes the point that these indicators were invented in the 1930s in an attempt to calm the fears brought on by the Great Depression and to prevent a similar event from happening in the future. As a result of major advances in technology, a lot has changed over the last 80 years. Yet, we’re still using the same metrics, or indicators, to predict market changes and determine financial decisions. Is this wise? The fact of the matter is, predicting the future of the economy is a lot like predicting the weather. We can look for certain signals and pay attention to the opinions of well-known economists who are trained to understand the indicators. But at the end of the day, we can’t totally rely on measurements such as GDP and unemployment. Though these indicators may have been effective in the past, it’s impossible to know if they’ll remain effective today and into the future. This isn’t to say that these numbers should be ignored, but they should certainly not be taken as absolute truth. Rather, it’s important to get a glimpse of the entire economic landscape with your financial goals in mind. We can help you make sense of it all and find the indicators that are most relevant for your family’s specific needs. Let us help you with a new approach today!