The Big Three Economic Indicators

By Jim Graham

Traders are always trying to understand the factors that cause the market to rise and fall. The truth is that there are a multitude of factors, and millions of investors make decisions that impact the market every day. Corporate earnings and news, political news, and general market sentiment can all move the market. But economic factors have the most influence on long-term market performance.

There is a lot of economic data available on the US economy, and almost every day some economic report or another is being released. When reading these releases I always try to assess the importance of each item and how it fits into the current economic situation. For the most important reports, especially those that may impact an industry that contains companies you are trading, it is often better to not rely solely on the analysis offered by financial journalists but to look at and try to understand the original sources.

Of all the economic indicators, the three most significant for the overall stock market are inflation, gross domestic product (GDP), and labor market data. I always try to keep in mind where these three are in relation to the current stage of the economic cycle. That gives me a framework to work with that allows me to estimate how any individual piece of economic data may affect these three indicators, and to then project its probable effect on the stock market as a whole.

Threes in Religion and Mythology

Chapter 4, “Threes in Religion and Mythology,”  in the book, Threes, is also the most popular mini-e-book in the series. 

Here are the contents of that chapter/mini-e-book:

Monotheism

The Significance of Abraham

The Holy Trinity

Three Notable Triplets 

Celtic Triads

Three Graces

Raja, Hatha and Bhakti

Brahma, Vishnu and Shiva

Three Fates, Three Furies and Three Pure Ones

Faith, Hope and Charity

Religion and Moral Courage

Copernicus, Kepler and Galileo

Lamarck, Darwin and Wallace

Three Arguments for the Existence of God 

I use long stories to illustrate the chapter focus.  In Chapter 4, for instance, I have narrated Darwin’s development of the theory of evolution and Galileo’s theory of a heliocentric "solar" system.  Both scientists struggled mightily against the church. 

Matter, Energy and Life

Three elements of matter, energy and life reinforce the concept that we all exist in an Earth-bound web that’s so intricately intertwined and interdependent that imbalances in one area can upset the dynamics of the entire system. 

Each element that is vital for life exists on Earth in a closed loop of cyclical changes.  From a systems point of view, Earth is essentially a closed system with respect to matter.  The functioning of our planet relies on a constant input of energy from the sun.  This energy leaves Earth in the form of heat flowing to outer space.  From a systems point of view, Earth is an open system with respect to energy.  A vast and intricate network of relationships connects all Earth's organisms with each other and with the cycles of matter and the flows of energy.  From a systems point of view, Earth is a networked system with respect to life.   

from Threes, Chapter 3, “Threes in Science”  

Stephen Hawking Time

Stephen Hawking (1942—) is one of the world's renowned theoretical physicists.  His view of time relies on earlier thinking by Newton and Einstein.  Hawking visualizes time as three arrows: the thermodynamic arrow, the cosmological arrow, and the psychological arrow.  The concept of these arrows helps explain why we see time as moving forward and what this flow of time actually is in terms of the expansion and contraction of the universe.  These arrows help distinguish the past from the future, and they give time a direction. 

“In our current state of the universe, all these arrows are pointing in the same direction, however, this will not always be the case, according to Hawking.  The thermodynamic arrow is derived from the second law of thermodynamics, which states that in any closed system, disorder (entropy) always increases with time.  Take an example of a glass falling from a table.  The glass begins in a state of heightened order; it is all in one piece.  As time passes, the glass hits the floor, and shatters into many pieces, increasing the disorder, or entropy, tremendously.”

Read more at Threes, Chapter 3, “Threes in Science”