Lagging Indicators and Forward Guidance

asked by u/watchara_s · 13d · 1 answers

Been trying to wrap my head around this. We get NFP, CPI, GDP numbers, which are, by definition, looking backward. Yet, the market rips or dips on them like they're crystal balls. The Fed talks about 'forward guidance,' but then they're reactive to these same lagging indicators. Is the game just trying to front-run the Fed's reaction to old news, or am I missing some layer of nuance here regarding how these 'lagging' indicators become 'leading' market movers?

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  • u/amensah· 3 pts· 13d

    You're not missing much. It's largely about anticipating the Fed's reaction to those lagging indicators, because that's what moves the needle. They might talk forward, but their actions are data-dependent, meaning backward-looking data.