I use the following three indicators to predict the behavior of the stock market:
- Energy prices. The two prices I monitor are crude oil and natural gas. Every single business and every single consumer experiences higher expenses when these prices increase.
- Interest rates. High interest rates not only dampen economic growth (and sometimes cause recessions), but they also compete for investment dollars. Why invest in the stock market if safe, interest-bearing investments yield a high rate of return?
- Business cycle. If the stock market and economy have been growing in a speculative fashion, expect a decline when the other two indicators are not favorable.
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