Tags: Market | PMI | Investors | Nervous

Market Moving PMI Report Proves Investors Are Very Nervous

Market Moving PMI Report Proves Investors Are Very Nervous
(Dollar Photo Club)

By    |   Wednesday, 02 September 2015 09:31 AM

A few months ago, it seems safe to say most investors were unaware of the monthly PMI reports. Now the report is being blamed for a one-day, 469-point decline in the Dow Jones industrial Average.

PMI stands for Purchasing Managers Index. The report is based on a survey of purchasing managers who can be thought of as the front line of the economy. Purchasing managers in a factory are responsible for maintaining the right level of inventory to meet demand.

Buying too much hurts profits. Too little inventory could result in lost sales and higher than necessary labor costs. Because of their importance to factories and other business, purchasing managers as a group provide important information about the state of the economy.

Monthly PMI surveys began in the United States in 1948. It has proven to be among the most reliable economic indicators available and is closely followed by economists and many investment professionals. In recent years, surveys have been extended to a number of countries, including China.

Before the stock market opened on September 1, traders learned China’s PMI was below 50 in August. This is a level associated with an economic contraction. More importantly, but unnoted in headlines, was the fact the new orders index also fell below 50 indicating manufacturing is unlikely to grow in the next few months.

China’s PMI was not good news and investors should be concerned about the global economy. Heavy selling after an economic report that was almost unknown in the recent past demonstrates investors are looking for any reason to sell. Many believe a bear market is likely and they are preparing.

This continues to be an excellent time to add positions to your portfolio that benefit from a market decline.

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MichaelCarr
A few months ago, it seems safe to say most investors were unaware of the monthly PMI reports. Now the report is being blamed for a one-day, 469-point decline in the Dow Jones industrial Average.
Market, PMI, Investors, Nervous
290
2015-31-02
Wednesday, 02 September 2015 09:31 AM
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