Connecting Global Economics to Your Trades
An interactive guide to the macro forces shaping financial markets. Explore how inflation, geopolitical events, and economic cycles influence trading decisions.
How to Trade Based on CPI and Inflation Data
This section breaks down inflation’s impact on markets. We explore how to interpret the Consumer Price Index (CPI), anticipate the Federal Reserve’s policy response, and strategically position a portfolio by analyzing which sectors have historically thrived—or struggled—when prices rise.
Decoding the CPI
The Consumer Price Index (CPI) measures the average price change of a basket of goods. Markets watch two versions: Headline CPI (all items) and Core CPI (excluding volatile food and energy), which the Fed often prefers as a gauge of underlying trends.
The Fed’s Reaction
The Federal Reserve aims for 2% inflation. When CPI is high, it “tightens” policy by raising interest rates to cool the economy. This makes borrowing more expensive, reducing spending and investment to curb price pressures.
Value vs. Growth
Rising rates hit Growth stocks (like tech) harder because their value is tied to future earnings. Value stocks (like industrials, financials) often perform better as their value is based on current cash flows, which are less sensitive to rate hikes.
Sector Performance in High Inflation
Explore historical sector returns during periods of high and rising inflation (>3%). Hover over bars for details.
Geopolitical Risk Explained: A Trader’s Guide
Geopolitical events are powerful market movers. This section explains how risks like trade wars and conflicts are transmitted to your portfolio through economic and financial channels. We use historical data to provide context on how markets typically react and recover from major shocks.
How Geopolitical Risk Impacts Markets
Economic Channels
Supply Chain Risk: Conflicts disrupt trade routes and production.
Commodity Shocks: Tensions in resource-rich regions spike oil and gas prices.
Reduced Activity: Uncertainty causes businesses and consumers to delay spending.
Financial Channels
Flight to Safety: Investors sell risky assets and buy safe havens like U.S. Treasurys.
Higher Risk Premiums: Investors demand higher returns, depressing asset prices.
Market Impact of Historical Geopolitical Shocks
Click on an event to see its impact on the S&P 500.
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Select an Event
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Is a Recession Coming? Key Indicators to Watch
The ability to spot recession warnings is a critical skill. This interactive dashboard explains the key leading economic indicators that traders monitor, from the labor market to business activity and the notoriously predictive yield curve. Learn how to build a more resilient portfolio for economic downturns.
The Trader’s Dashboard: Key Recession Indicators
The Yield Curve
2-Yr
10-Yr
A normal yield curve, where long-term bonds yield more than short-term ones, signals expectations of healthy economic growth.
PMI Index
A Purchasing Managers’ Index (PMI) reading above 50 indicates that the economy is expanding. Businesses are seeing new orders and increasing production.
Employment Data
Job Growth
Strong Non-Farm Payrolls and a low, stable unemployment rate are signs of a healthy labor market, a cornerstone of economic expansion.