This is the first part of a series explaining the Money Guide Indicators. Parts 2 & 3 can be accessed as standalone posts through the Resources tab on the homepage or by clicking here:
Frequently, we come upon numbers that, supposedly, should convey us a clear message. For example: “The S&P500 index is at 4187”. How much is 4187? Is that good? Is that bad? What does it even mean for the S&P500 index to be at 4187? What is the the S&P500 index?
Financial and economic articles are usually filled with data: eye-catching graphs, mountains of important looking numbers, clever comparisons, and so on. But little to no actionable “intelligence” (processed information for decision making). Many analysts fall in that trap. Sometimes I fall in that trap too, although I constantly try to avoid it.
Admittedly, this newsletter includes a series of indicators every week. I think those indicators are the minimum ones that the current subscribers might need to get a sense of the overall status of the economic and financial world. There are certainly others, and the ones that appear in this newsletter are subject to change.
My first approaches were to write just the numbers for each indicator. I quickly realized that there needed to be other references to previous values and future forecasts. I included arrows to make it easier to notice those movements at a glance. The next question that came to mind was: “If values increase, is it good or bad?”. The answer was not the same for all indicators, and it might be different for different people: someone might believe it’s positive that a stock went up, while another one might think it’s bad because he wont’t be able to afford it. I decided to take a macro-perspective to determine what I believe to be positive and what I believe to be negative, and added color references to represent this evaluations in a way that could be understood intuitively. Through many more questions and iterations, I have gradually refined the Money Guide Indicators to make them as useful as possible.
The current version looks like this:
That line of text, numbers and figures expresses the following:
The financial instrument: S&P 500 index
Current trading week opening level (price): $4211 USD
Change in price (level) since previous period (week): an increase (▲) of 0.6% vs 4187, which is positive (🟢 green color) from a macro-economic perspective
Change in price (level) since the start of the current year: an increase (▲) of 9.5% vs 3845, which is positive (🟢 green color) from a macro-economic perspective
Mid-term forecast: a decrease (▼), which would be negative (🔴 red color) from a macro-economic perspective
Current year price (level) graph
I believe that’s a lot of relevant information that can be understood at a glance and, most importantly, it’s actionable intelligence for decision making. Especially when combined with other indicators that give a wider macro-economic perspective.
To make them even more useful, components are grouped in sectors:
Rates & yields
Currencies
Stocks
Commodities
Crypto
Each sector is important by itself, and all of them are related.
Iin parts 2 & 3 of this series, I explain the different components of each of the sectors of the Money Guide Indicators, and what their behaviors convey about themselves and the economy as a whole.
-SM
Part 2 of this series can be accessed as a standalone post through the Resources tab on the homepage or by clicking here:
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