it’s natural to be worried or anxious whenever the stock market gets a bit volatile particularly when the word recession starts getting mentioned in the media however there is often a disconnect between people’s fears and the reality of the stock market and some people have a difficult time conceptualizing it here’s an important reminder to keep in mind when you think about the stock market the market itself is approximately six months forwardlooking what does this really mean in the stock market valuations are reflective expected future earnings they’re a leading indicator for the economy in general markets are continually pricing in new information and expectations about the future which can be difficult to conceptualize for investors it’s a basic principle but it can shed a lot of light onto why we experience the markets as we do and it can also help calm nerves when investing this year we saw markets go downhill during the first few months of the year and in hindsight the market was pricing in the everchanging potential path of the federal reserve now that we’re in the summer the markets aren’t as concerned about the gdp but instead they are pricing in the potential expected path of inflation and the expectations for corporate earnings for the remainder of 2022 and into 2023 there are additional leading indicators that may point toward how the economy may fare in the future beyond just the stock market consumer sentiment and housing are two additional measures that are often used to estimate how the future economy may expand or constrict in the coming months its important to keep in mind that markets are forwardlooking so that we don’t make snap decisions when investing it’s easy to be swayed by the constant bombardment of the news each day when we hear about how high inflation is or an impending recession however much of this is already priced in the markets from months ago as the markets are forward looking a daily data point while of interest during that specific day is only a daily data point – and has likely been expected and priced into the market already there’s a lag between the stock market cycle and the economic cycle with the peaks and bottoms of the economic cycle falling after the stock cycle as the stock market is forwardlooking because of this lag investors that try to time the market often end up missing some of the best trading days and returns when we look at the lag with the economic cycle there are a few other lagging indictors that give insight into what has been happening with the economy these data points aren’t future indicating but rather give us insight into what has happened and where we currently are we can use information from unemployment rates business spending figures and interest rates to determine how the economy has fared and where we currently are in an economic cycle when major events occur in the world and in the markets you may feel uneasy and that is natural try to keep perspective on what’s happening and remember that the stock market is always forwardlooking so that the volatility and dips that rattle those markets are in fact priced in already investing is a longterm process and it is helpful throughout that process to maintain your perspective with a calm even keel remember that the markets are always many steps ahead of whatever is happening today and hang in there