Market timing is as much of a science as it is
superstition. There is enough data out there that points out that market timing
is a futile endeavor, and that it is nearly impossible to predict. Although in
general, it is right there are red flags that might point to a recession or a
downturn in the economy. These could be great indicators to understand how the
market might react going forward. It’s impossible to predict what the market
will do, but being up to date with some news and following data in some key
parts of the economy can help you.
Most of us have no way of predicting what is
going to happen tomorrow, much less what will happen in a few months from now.
Market timing can be dangerous and it is not for everyone. Some people prefer
to be long-term investors and do not worry about a slight market correction. However, there are some
signs that could help you predict if a downturn is close or not.
Jobs
One of the most effective and important pieces
of data is the jobs report. This will tell you how many jobs were created, and
what is the unemployment rate. You can also check the jobs available and
essentially get a broader picture of the jobs market. A possible increase in
unemployment and reduction of jobs available could spell trouble ahead.
Debt
Jobs are an important part of the process to
get acquainted with the general economy, but there are other ways to do so. One
of them is looking at the debt. The national debt is an important factor, as is
the debt in the private sector. Household debt is also another important
component, if it is high, coupled with high unemployment could be a very bad
combination.
Avoid Investment Mistakes
A key part of investing is to minimize losses.
Mistakes in this area tend to cost you money, and they should be avoided at all
costs. Keeping an eye on these components of the economy could help you time
the market. Investment mistakes happen to all of us, the
key aspect of it is to try and learn from them as much as you can.
