Economic Indicators Dashboard – May 2016 Update

U.S. equity markets (represented by Russell 3000® Index) continued to rally for the third straight month in May 2016, up almost 2% for the month and up 9.4% for the past three months. The Federal Reserve appears to be in a holding pattern regarding interest rates for the time being, although the Russell Investments strategist team still expects at least one rate hike before the end of 2016.

Similar to last month, the same seven of eight major economic and market indicators tracked in the Economic Indicators Dashboard remained within their historical typical range for May. The economic indicators for inflation and economic expansion were noteworthy for the month.

Economic Dashboard June 2016

Accessed on June 12, 2016.

How do I read this chart?

This dashboard is intended as a tool to set context and perspective when evaluating the current state of a sample of asset classes.

The ranges of 12 month returns for each asset class are calculated from its underlying monthly index returns. The stated inception date is the first full month of an index’s history available for the dashboard calculation.

Here is how to read the graphic on this page:

FOR EACH INDICATOR, THE HORIZONTAL BAR SHOWS FOUR THINGS

A GRAY BAR shows the full range of historical rolling 12-month returns for a sample of asset classes.

A BLUE COLOR BAND represents the typical range (one standard deviation away from the mean, i.e. 68% of historical observations) of rolling 12-month returns for these asset classes.

AN ORANGE MARKER represents the most recent 12-month return of the asset classes.

Inflation

Inflation increased in May to 1.14%, up from a reading of 0.87% in April. The increase in inflation comes partially from oil prices beginning to stabilize around $50 and a falling U.S. dollar. Although oil and the dollar may still move, they are settling in at more reasonable levels. The economic indicator is still near the low end of its historical typical range, but has been moving toward more normal levels.

Economic Expansion

After an initial first quarter GDP growth estimate of 0.5%, a revision at the end of May resulted in an increase to 0.8%. Improvements in new home construction (17.1% actual vs. 14.8% estimate) and the value of inventories ($69.6 billion actual vs. $60.9 billion estimate) are responsible for the increase in the indicator. Stronger retail sales, goods exports and home sales in early April will likely support further GDP growth in the second quarter.

The bottom line

With much of the dashboard in May 2016 remaining at similar levels to the previous month, the economy continues to look healthy and the change in inflation and GDP improvement in 2016 show moderate growth in the U.S. All eyes will be on the Fed as it decides when next to raise interest rates.

Drew Tolson is a summer Intern for Capital Market Insights at Russell Investments.

Standard Deviation is a statistical measure that reflects the degree to which an individual value in distribution tends to vary from the mean of the distribution. Standard Deviation is a useful tool in measuring the historical typical range as 1 Standard Deviation includes approximately 68% of the historical values in a normal distribution. Using this measurement allows us to exclude the more extreme values which would not be as probable to see from the indicator.

Data stated is historical and not a guarantee of future results.

Data displayed in the Economic Indicators Dashboard are reflective of current data as provided by the data sources including any revisions to previous data. These revisions may change historic data points and historic ranges for some or all indicators. These changes are usually due to seasonal adjustments to previously supplied data.

The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. It is not intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Anyone using this material should consult with their own attorney, accountant, financial or tax or consultants on whom they rely for investment advice specific to their own circumstances.

Indexes are unmanaged and cannot be invested in directly.

Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its indexes.Russell Investments is a trade name and registered trademark of Frank Russell Company, a Washington USA corporation, which operates through subsidiaries worldwide and is a subsidiary of London Stock Exchange Group.

Copyright © Russell Investments 2016. All rights reserved.

This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty.

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