ARBOR WEALTH: Groundhogs, katydids and leading indicators

Staff Writer
The Destin Log

“Oh the days dwindle down … to a precious few …

September … November…” from “September Song” as recorded by Willie Nelson

Pennsylvania has Punxsutawney Phil; Florida has singing katydids. 

Last week a wonderfully entertaining article in the Sebring News (central Florida) described a variety of signs that we are facing an early, cold and wet winter. A primary source is the Farmer’s Almanac. Mainly, though, folks around Sebring are observing nature’s pre-winter activities.

One Sebring native says that katydids are singing, and this traditionally means that winter’s first frost is only six weeks away. “Thick tails and bright bands” on raccoons and thick hair on the nape of cows’ necks represent more signs that cold weather is coming. Crickets populating the fireplace hearth earlier than usual is another harbinger. Some Sebring natives say that considerably cooler weather is imminent when spiders spin webs that are larger than normal and find their way inside peoples’ homes.  Finally, squirrels are already burying acorns for the winter.

Pretty unscientific, huh? But I’ll be shocked if our central Florida friends are incorrect. Animals, insects and birds can “sense” the earth’s changing seasons. Anyone who has witnessed the movements of nature’s creatures just before a hurricane arrives has likely marveled at their prescient qualities. By the way, January is likely to be our coldest month this winter.

Wouldn’t it be wonderful if certain events tipped us off to similar coming market changes?  As my father used to say, “Would that it were.” Lagging and coincident indicators only provide backward and sideward glances. For instance, a look at current corporate profits (a lagging indicator) tells us nothing about the future, because these numbers represent past performance.

Leading economic indicators may provide some front windshield views, but economists differ on how these factors should be interpreted. Many items are considered leading economic indicators by the Conference Board, including 10 that comprise the Composite Index: average weekly hours (manufacturing); average weekly jobless claims for unemployment insurance; manufacturer’s new orders for consumer goods; vendor performance; manufacturer’s new orders for non-defense capital goods; building permits for new private housing units; the S&P stock index; money supply; the interest rate spread and the index of consumer expectations. 

Synthesizing and applying this information, once it’s assembled, is a neat trick, especially when individual leading economic indicators provide conflicting data. What’s an investor or advisor to discern, for instance, when manufacturer’s new orders for consumer goods and capital goods are up, but when consumer expectations and vendor performance are down? Various aspects of the economy may be performing at different levels.

Which is why all the securities and sectors of a well-designed portfolio do not rise or fall in concert simultaneously.  In other words, “the Bronx is up, but the Battery’s down.”

Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (850-608-6121 —, a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.