Twenty years ago, before the creation of CNBC and before the media spent as much time as it does now on market watching, investors had more difficulty getting economic information and market impact assessment. This lack of information gave investment dealers, fund managers, and other larger-scale investors a relative advantage. Today, investors have access to much of the information available to institutions, although that has not altered the importance of in-house economic research. In fact, today’s market participants are so inundated with information that the quality of the analysis is even more important; investors must sort out useful information from misleading or worthless information.
Unfortunately, the media does not always explain what is behind reported numbers either. Media sound bites tend to be superficial and often miss the most interesting or meaningful aspects of the particular event or data release. For example, the media may report that retail sales are strong, without explaining whether this strength is the result of outstanding performance in just a few categories or good performance in a broad range of categories. An advisor's role is to take a closer look at the numbers and brief their clients on the broader implications for specific sectors of the economy and forecasts.
Market participants sometimes use the word noise when discussing certain economic releases, which means ambiguous messages from a single report or mixed readings from a series of releases. Noisy data can hide the real direction of an underlying variable or of the economy in general. Advisor's use many tools to filter out the noise, including seasonal adjustments, moving averages, and trend analysis. Short-term fluctuations in the data may provide investors with tactical trading opportunities as market participants react to monthly changes in the data. It is important, however, to be aware of long-term trends to properly position the strategic asset allocation mix.
This is the underlying goal of any sound portfolio strategy, and one that needs continual guidance. Which is also where the professional advisor truly earns his keep.
Regards.
Unfortunately, the media does not always explain what is behind reported numbers either. Media sound bites tend to be superficial and often miss the most interesting or meaningful aspects of the particular event or data release. For example, the media may report that retail sales are strong, without explaining whether this strength is the result of outstanding performance in just a few categories or good performance in a broad range of categories. An advisor's role is to take a closer look at the numbers and brief their clients on the broader implications for specific sectors of the economy and forecasts.
Market participants sometimes use the word noise when discussing certain economic releases, which means ambiguous messages from a single report or mixed readings from a series of releases. Noisy data can hide the real direction of an underlying variable or of the economy in general. Advisor's use many tools to filter out the noise, including seasonal adjustments, moving averages, and trend analysis. Short-term fluctuations in the data may provide investors with tactical trading opportunities as market participants react to monthly changes in the data. It is important, however, to be aware of long-term trends to properly position the strategic asset allocation mix.
This is the underlying goal of any sound portfolio strategy, and one that needs continual guidance. Which is also where the professional advisor truly earns his keep.
Regards.
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