Economic data trends, and trends in the same direction for a long time, at times. And every now and then, it peaks (or bottoms) and starts trending in a new direction – up or down.

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However, turning points in long-term trends are uncommon, and there are times when there is no trend at all.

And it is during these long-term or trendless trends that people mistake ebbs and flows for meaningful ebbs and flows. Worse, they persuade themselves or others that one of these ebbs or flows should be acted on in the context of an investment portfolio.

But here's the catch: the less one reacts to the regular ebb and flow of ongoing data releases, the better off one usually does as an investor. Because on the next release, an ebb can be quickly replaced by a flow. A flow could also become an ebb. Back and forth, back and forth, back and forth, back and forth, back and forth, back and forth, back and forth, back and forth, back and forth Not every snap of a twig in the forest represents a predator stalking the campground, and not every new piece of economic data contains anything meaningful.

Economic data is always discussed in terms of whether it is above or below a market consensus of some kind. This is significant because the media uses terms such as "beat" or "missed" to describe the most recent data point. Which is understandable; people want to know if something is unexpected. But one very important point that is often overlooked in all of this scorekeeping is that the data isn't the only thing that is moving and changing! Expectations are constantly shifting as well.

So it’s a moving target forecasting a moving target.

Takeaways

The longer you do this, the more obvious it should become to you that the interaction between the economy and the stock market on a short-term basis is not at all intuitive, and is often counterintuitive.

Trends can last much longer or much shorter periods of time than you may believe is reasonable or rational. They can also change direction at any time or dematerialize into trendlessness. There are no formulas for predicting these turning points. We'd all use them if they existed.

Just because someone is knowledgeable and intensely focused on a particular data series does not imply that they will be any better at predicting its future than the rest of the crowd. In fact, their unwavering focus on it and constant proximity to it may impede their ability to contextualise it and grasp the bigger picture.

The data will ebb and flow. Opinions about the data will ebb and flow as well. Nobody is good enough to consistently be one step ahead of both in an actionable way at all times.

Invest accordingly.