You really should get to know Fred. Or, more precisely, FRED, an acronym for Federal Reserve Economic Data, a free data aggregation website compiled by the Federal Reserve Bank of St. Louis.
Even if it does nothing else particularly well, the U.S. government keeps very, very fine records. FRED aggregates more than a quarter-million domestic and international data series from 68 sources, including the Bureau of Labor Statistics and the Census Bureau. For those so inclined, there’s even a new feature that allows for one-click downloads directly onto an Excel spreadsheet.
FRED is complex but approachable. Data is divided into eight major macro-economic categories: academic; money, banking and finance; national accounts; population, employment and labor markets; production and business activity; prices; international; and U.S. regional.
The FRED blog also provides brief but cogent explanations for timely economic questions, plus updated charts on those subjects. Recent posts include a multidecade series for flexible and “sticky” consumer prices, a comparison of declines in the unemployment rate over the four economic recoveries since 1982 and a double-line graph showing the unemployment rate relative to what the nonpartisan Congressional Budget Office calculates to be the “natural” jobless rate.
Two data sets could be especially important for investors. In the Search bar at the top right, type in “leading index for the United States” and “smoothed U.S. recession probabilities.” In each case, you’ll note that the data crosses an important threshold just as a recession begins. At first glance, that information might be viewed as nothing more than a coincident indicator. It is much more, however, because markets typically don’t perceive an economic downturn has begun until several months into a recession, thus potentially giving investors time to position their portfolios more defensively.
During the fierce bear market that accompanied the recent global financial crisis, for instance, only about 5% of the eventual 56% decline in the S&P 500 occurred between the market top in October 2007 and the beginning of the recession in December 2007.
More broadly, economic issues have always underpinned stock and bond prices. Given the often stunning amount of misinformation floating about in the supposed information age, the accuracy and perspective that FRED provides its digital neighbors is its own reward.
Better that than a cup of sugar.