The United States economy and stock market like many other countries is driven by forecasts and hitting those expectations also considered to be benchmarks. In addition, most economies are dependent on how other countries economies are performing as we operate primarily in a global economy where the news and events of one country directly impact other countries. Forecasts act as benchmarks for particular data news such as consumer price index (CPI), producer price index (PPI), job creation numbers and unemployment rate to name a few. This forecasts act as targets and if the news comes in above or below expectations this can create volatility in the markets.

Above is a chart of the unemployment numbers represented as percentages. Each month the forecasts are created by analysis displayed as the gold bar. The actual number is the blue bar. When major news is released it is typically released at 8:30am EST an hour before the New York Stock Exchange opens. This is important as this will influence in what happens in the market that day and how it affects long term trends. A majority of people save for retirement by investing in 401ks, IRAs, and other retirement plans and the numbers being released give you a read on the pulse of the economy. These negative reactions can create downward pressure on the markets and lead to losing money or having diminishing returns on those accounts.

Another way benchmark performances are evaluated is by comparing a particular stock versus an index fund that is similar to the underlying stock. Take a look at the chart below.

The chart above uses line graphs to compare ticker symbol UCB versus the Stoxx 600 Health Care Index. This shows that the shares of UCB has outperformed the index significantly. This largely is because of their release of a drug to treat psoriasis. This is important when managing funds and rotating different investments to receive the highest return possible.

Benchmark analysis is a critical component to not only our economy but the global economy. By being able to accurately evaluate the data it can help make informed decisions. There are different ways to display benchmarks but all are important when understanding the data and how to evaluate it.