We recently compiled a list of the Top 15 U.S. Economic Indicators Every Investor Should Know and in this article we will talk about the top US economic indicator every investor should know.
Why Invest in Stocks?
There are a variety of investing options available including stocks, bonds and real estate. However, investing in stocks is one of the most lucrative options. Based on estimates by Aswath Damodaran, NYU business professor, if a person had invested $100 in the US stock market in 1928 the amount would have increased to $1,000 by the mid-1950s, $10,000 by the mid-1980s, and almost $750,000 by the end of 2021. The data indicates that it would take almost 100 years to convert $100 to $1 million. The numbers are remarkable when compared to other asset classes. During the same period, $100 invested in US Treasury bonds would help reach about $8,500, and real estate would only reach $5,000.
The attractive opportunity for investment presented by stocks is availed by a large sum of the American population. According to the results of the Economy and Personal Finance survey conducted by Gallup, in 2023, 61% of Americans owned stocks. The number of people owning stocks experienced a slump post-2008. The numbers decreased from 61% of Americans holding stocks in 2008 to 59% in 2009 and 56% in 2010. Based on the survey results, the number of people who owned stocks has been recovering post-2016, from the number going from 52% in 2016 to 55% in 2018 to 58% in 2022. The numbers were restored to pre-2008 levels in 2023, 61%, implying the stability and regaining of local trust in the stock market.
Total and disposable household income along with education also impact the investing habits of a person. In 2023, American households with an income of $100,000 or above had 84% of adults investing in stocks. The number was as low as 29% for households earning less than $40,000. Education also impacts investing habits as 8 in 10 college graduates were investing in stocks. Better education and reasonable household income showed an increase in inclination towards investing in stocks.
Retail Investing Made Easy
Robinhood Markets Inc. (NASDAQ:HOOD) has made retail investing easier. Robinhood Markets Inc. (NASDAQ:HOOD) pioneered commission-free trading, making trading and investing for beginners more accessible. On May 15, Robinhood Markets Inc. (NASDAQ:HOOD) reported the operating data for April 2024. The number of funded customers at the end of April amounted to 24 million, showing an upsurge of 90,000 compared to March. Net deposits for April were $4.9 billion, indicating a 45% annualized growth rate from March. The net deposits have experienced a 35% annual growth rate from April 2023. The growing platform offers a great opportunity for retail investors to explore more options.
Top Beginner Friendly Stocks
Blue chip stocks refer to companies with mature businesses and stable financials. These companies offer a beginner-friendly way for prospective or amateur investors to get started. Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) are among the most popular blue chip stocks.
Apple Inc. (NASDAQ:AAPL) has a strong track record of profitability and driving shareholder value. On May 2, Apple Inc (NASDAQ:AAPL) reported earnings for the fiscal second quarter of 2024. Apple Inc. (NASDAQ:AAPL) reported an EPS of $1.53, beating estimates by $0.02. The company’s revenue for the quarter grew by 8.32% and amounted to $90.75 billion, ahead of market consensus by $299.27 million. Here are some comments from the company’s earnings call:
“Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max.”
Microsoft Corporation (NASDAQ:MSFT) is another noteworthy company that has exhibited consistent growth and profitability patterns. On April 25, the company reported earnings for the fiscal third quarter of 2024. The company reported an EPS of $2.94, beating estimates by $0.1. The company’s revenue for the quarter grew by 17.03% and amounted to $61.86 billion, ahead of market consensus by $977.92 million. As of May 30, Microsoft Corporation (NASDAQ:MSFT) has surged nearly 20% over the past 12 months. Here are some comments from the company’s earnings call:
“It was a record third quarter, powered by the continued strength of the Microsoft Cloud, which surpassed $35 billion in revenue, up 23%. Microsoft Copilot and Copilot stack, spanning everyday productivity, business process, and developer services, to models, data, and infrastructure, are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry. Now, I’ll highlight examples, walking up the stack, starting with AI infrastructure. Azure again took share, as customers use our platforms and tools to build their own AI solutions. We offer the most diverse selection of AI accelerators, including the latest from NVIDIA, AMD, as well as our own first-party silicon.”
Our Methodology
To make our list of the top US economic indicators every investor should know, we initially sifted through more than 10 sources comprising banks, financial research institutions, and financial media. We then separated the terms that appeared in at least 50% of these sources and ranked them in no definitive order.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Top US Economic Indicator Every Investor Should Know
1. Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is one of the top US economic indicators every investor should know. A large GDP corresponds to a bigger economy and a bigger market. By understanding and comparing GDP growth rates among different economies, investors can better understand where to allocate their investments for maximum returns. The comparison of GDP growth rates allows investors to narrow down on fast-growing economies and identify emerging markets for investments. Furthermore, corporate profits and inventory data in the GDP report are valuable for equity investors, as both categories show total growth during the period.
To learn about other top US economic indicators, you can check out our detailed report Top 15 U.S. Economic Indicators Every Investor Should Know.
At Insider Monkey, we delve into a variety of topics; however, our expertise lies in identifying the top-performing stocks. Currently, Artificial Intelligence (AI) technology stands out as one of the most promising fields. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.
