What are the specific components of the Timing Outlook, and how is each of them evaluated?
1. Economic indicator: Conference Board Index of Leading Economic Indicators. The evaluation here is not so much concerned with the Leading Index’s value as with its direction. The Leading Index is calculated once per month, and it is widely reported in the media and on the Conference Board’s Web site. Interpretation: Rises for three straight months: Positive. + 10 points. Falls for three straight months: Negative: + 0 points. Neither of the above: Neutral: +5 points. 2. Interest rate indicator: Fed Funds rate. I consider a rate around 4% as “neutral.” If the Fed Funds rate is much lower than that, or if the Fed is actively lowering interest rates, it is clearly trying to stimulate the economy, which would ordinarily be good for stocks. If the Fed Funds rate is much higher than that, or if the Fed is actively raising interest rates, it is trying to slow the economy down to ward off inflation, and that is usually bad for stocks. Interpretation: Current rate is 3.5% or less and the Fed l
