FOMC, CPI, Upgrades/Downgrades

Economic Calendar (click to the left to see the Investing.com website)

• Look for the Federal Open Market Committee, Consumer Price Index, and Unemployment Rate

• Filter searches to just have US highlights for the above topics

• Consider other major countries that may impact supply chains or bring uncertainty to specific stocks (oil) or the market

US Economic Calendar (click to the left to see the Marketwatch.com website)

• Unlike the Investing.com site, this filters only the US Economic Calendar

Other Options that might be easier to read

• Market Watch Calendar (My personal favorite)

• Bar Chart

Federal Open Market Committee (FOMC - aka the FEDS or Federal Reserve)

• • The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements (see about the FOMC).

  • The FOMC often takes the stance that economy can fix itself without intervention if possible.

  • Stimulating the Economy (see Quantitative Tightening vs Easing)

    • Quantitative Easing - When the economy is experiencing hardship, a central bank buys bonds to drive down longer-term rates. As it creates money for those purchases, it increases the supply of bank reserves in the financial system, and the hope is that lenders go on to pass that liquidity along as credit to companies and households, spurring growth.

    • Quantitative Tightening - conversely, means reducing the supply of bank reserves through making periodic bond purchases.

    • Tapering - refers to the Federal Open Market Committee (FEDS - Federal Reserve) creating policies that modify the central bank activities. This can take place by changing Discount Rate (FEDS lower or raise interest rates on short term loans to Commercial Banks) or by changing the Reserve Requirements (the minimum amount commercial banks are required to have on hand at any given time due to sudden withdrawals).

  • Interest rates have a profound impact on the evaluations of companies; especially Growth Stocks

    • Most companies take on short and long term debt to finance their business for development, expansion, and operation

    • Remember, the evaluation of a company is based on the current circumstances. If interest rates rise, that cuts into profitability and changes the potential of ROI in the future. Conversely, if interest rates dramatically fall, a company could see a larger ROI due to saving on interest rates

    • Growth companies are impacted the most as their future growth is slowed by higher interest rates, but they can also see the greatest returns the fastest with falling interest rates.

    • One way to analyze a stock is to see if the cash on hand is greater than the debt they have on hand. The ability to pay off creditors quickly could avoid paying higher interest rates; though it may stunt their ability to pay dividends or to expand.

    • see How do interest rates affect the stock market

Consumer Price Index (Month over Month #'s, Year over Year #'s)

• • CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.

  • Example of how various goods and services increase in price month to month by category and overall for the year (see CPI Summary)

  • The FEDS like to see inflation around 2% per year on average

    • • When inflation is higher than 2%, the FEDS will contemplate tapering, changing the reserve requirement, or changing the discount rate.

      • The annual inflation is why you need to figure out how to keep an annual raise around 2% a year (10% and wait a few years)

      • The quickest way to increase your salary is by finding another job and asking for a minimum of 10% more than what you were getting paid; personally think you should ask higher if possible to negotiate down, but you will figure that out for yourself.

      • Inflation is also the reason why we want to make sure our money is earning at least 2% per year to keep up with inflation as opposed to sitting in a bank account earning a fraction of 1%.

Unemployment Rate (see Current Unemployment Rate)

• The Unemployment Rate has an inverse relationship to the market.

• When the unemployment rate rises, the stock market declines. When unemployment rate declines, the stock market rises.

• Whether business decline is the result of higher unemployment or vice versa, monitoring the rate can help you understand the general direction of the market.

• see the Unemployment vs Stock Market Correlation

Upgrades and Downgrades (see Buy, Outperforming, Hold, Underperforming, Sell)

• Take this with a grain of salt; unless its a downgrade/sell

• Analysts from multiple companies will evaluate a company and set a target price. While some may look at a median price of all analysts, all prices should be seen as a potential outlook.

• Downgrades/sell calls from analysts on the other hand should be taken seriously