Tuesday, 14 October 2014

Crash or Correction? See What Key US Economic Data Are Indicating!

For the past 5 days (8th Oct 2014 - 13th Oct 2014), the Dow Jones Index have shed 429.34 points (-2.52%). There's raising concern that there will be further correction of the Index as investors continue to let go of their stock holdings. 

Is this the time for us the local Malaysian Investors to exit our holdings as well? Or perhaps this is a correction that creates opportunities for us to buy stocks or unit trust at low prices?

Dow Jones Crashing or Correcting?

Technical analysis aside, let us take a look at the current US Economic Data to see if we are infact facing crash or a correction? 

Economic Data:
1) US Purchasing Managers Index
  • Benchmark : Value above 50.00 indicate positive manufacturing growth
  • US PMI data as of 30 Sept 2014 : 56.60
  • US PMI data as of 31 July 2013 : 55.40 (previous review)
  • Additional Information : The PMI data for 30th of September 2014 increased by 1.20 (+2.17%) in comparison to PMI data of 55.40 recorded on 31st of July 2013
  • Current Outlook : POSITIVE

What is PMI? Click HERE to find out.

2) US Unemployment Rate
  • Benchmark : 
    • Highest Unemployment Rate Recorded over 10 years : 10% in Oct 2009
    • Lowest Unemployment Rate Recorded over 10 years : 4.4% in May 2007
    • 2008 Global Financial Crisis was forewarned when Unemployment Rate spiked from 5.0% in April 2008 to 5.4% in May 2008
  • Unemployment Rate for Sept 2014 : 5.9%
  • Unemployment Rate for July 2013 : 7.4% (previous review)
  • Additional Information : Currently the Unemployment rate is still at reducing trend. Investors to be wary when the Unemployment Rate touches the 5.0% and below range. Also to watch out for sudden increase of unemployment rate when the figures are at 5.0% and below.
  • Current Outlook : POSITIVE

More about Unemployment Rate? Click HERE.

3) US Treasuries Yield Curve
  • Benchmark :
    • Positive Yield Curve indicate economic recovery
    • Flat Yield Curve indicate slow economic growth
    • Negative Yield Curve indicate impending economic recession
  • US Treasuries Yield Curve as of 10th Oct 2014 : Positive Yield Curve with Low Interest Rate
  • US Treasuries Yield Curve as of 31st July 2013 : Positive Yield Curve with Low Interest Rate (previous review)
  • Current Outlook : POSITIVE

More about Yield Curve? Click HERE.

All three (3) main economic data from the United States are indicating a positive outlook at the present moment. However, investors should watch closely the unemployment data as it is close to approaching the critical value of 5%. 

In my honest opinion, the Dow Jones is currently undergoing a correction and not a crash. Economic data are indicating that the fundamentals of growth in the US are still strong.

Disclaimer : I must stress that what I;ve to posted above are purely economic data. It is not a recommendation to buy or sell. The choice is ultimately yours to decide.

P.s : If you are looking for a passive long term investment via online, feel free to contact me at shanesee03@gmail.com

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