Mastering the Market Without The Math
A practical guide to reading the economy like a trader, without a PhD in Economics ✅
A gentleman recently messaged me, asking: “Timothy, should I go back to school and study economics or Finance to do better in the markets?!” Chuckling to myself, I responded confidently with a hard “NO” but that if he truly enjoyed the topics, then go for it.
If economists and mathematicians (or any numerical base of study) were so gosh darn smart…then why do so many of them actually lose in the markets? In fact, its almost embarrassing to say, but most economists are relatively poor. The World Economic Forum1 discusses that being an Economist does not give you the golden fountain of knowledge in the markets. But some aspects do, sometimes, prevent large losses.
When I introduce myself, you may have heard me say “Hi, I’m Timothy James, a Quantitative Economist and Investor…” Note, that I say both of those titles, individually. Too a viewer, particularly new investors, some think that the “Quantitative Economist” part must mean that I have a divine knowledge of the markets…LOL which is FALSE! To be totally fair, in my early 20’s studying economics at the U.S. Naval Academy…I also thought I was God’s divine gift to the markets. Yea…I lost nearly everything in 2008, along with all the other “smart people.”
The point being: Some of the greatest investors of all time, were engineers, psychologists…some even high school drop outs (many of them, weirdly). You do not need to study economics or finance to be a successful investor! However, let me show you the little bit of economics that will hopefully help you on your investment journey…
Leads & Lags
Leads and lags is all you need to know. Its easiest to start with an example, we will use interest rates. Another gentleman, we will call him Bob, commented on a recent TikTok video:
Bob: “85% chance no rate change for May”
But respectfully, his thinking is wrong…so I responded back with:
Timothy: “I track July and September. Market priced in May already. Markets look forward usually 4 to 6 months.”
Interest rates are absolutely an “economic” variable. The Federal Reserve doesn’t raise or lower interest rates to pump or dump your stock portfolio, contrary to popular belief. They are adjusting interest rates to control, or attempt to control, inflation. The fact that Bob is thinking about May interest rates, means that the market left Bob behind at least 4 months ago.
Repeat after me:
The market is a forward looking, discounting mechanism
The market is a forward looking, discounting mechanism
The market is a forward looking, discounting mechanism
Bob is thinking “no rate cuts”. The market is thinking “2 rate cuts”…because it is looking forward to July and September. You can see how both thought processes, can result in very different performances in portfolios over time. Very different speculated trajectories. And full disclosure, the market can change it’s mind at any time, but the data available today at the time of writing, it is discounting at least 2 future rate cuts.2
How do we know that the market is a forward looking discounting mechanism? A very simple example:
March 2022: First Interest rate hike3, S&P 500 going DOWN
October 2022: Interest rates continue up, stock market BOTTOMS
November 2022 to July 2023: Interest rates continue up, market is going UP
In this particular example, stocks were climbing for 6+ months while interest rates were still going up. Why? Because the market speculated steady rates well in advance of them actually steadying out in July 2023 and even dropping later on. The market lead interest rates. Forward looking, discounting mechanism.
The point of the story being: You must put your mind into the FUTURE, like the market. “What is the stock market thinking about economic variables, 4 to 6 months from now?” Now when you ask yourself those questions, the answers to those questions, whether bullish or bearish, will oftentimes determine your actual market trajectory.
What Questions Should I Ask?
There are millions….billions….of variables that go into the market. However, the top 5 economic variables, in my opinion, to ask yourself are:
Interest Rates
Inflation
Employment Data
Earnings
GDP Growth Rate
We already covered interest rates. Now these are the questions I ask myself, when developing a longer term forecast for the markets:
Market Asks: “Is inflation going to be better or worse in 6 months?”
The Organization for Economic Co-operation and Development4 provides inflation data, and right now, the trend is down. A great sign. However, tariffs are raising, at least short term fear, of massive increases in prices. Whether that actually comes to fruition, nobody knows. Regardless, the markets prefer predictability in inflation, and it cannot right now.
Market Answers: “I do not know” = Bearish
Market Asks: “Will employment be better or worse in 6 months?”
Without people having jobs and spending money, there comes a point people’s savings and credit cards are exhausted. Unemployment rate increased from 3.8% to 3.9% to 4%….subtle early warnings. Additionally, we continue to see mass layoffs in both private and federal government.
Market Answers: “Employment will be worse” = Bearish
Market Asks: “Will corporate earnings be better or worse in 6 months?”
This is a broad question…but typically I focus on Magnificent 7 stocks. Is Amazon, Meta, Apple, Tesla, etc. going to be making more or less money in a few months? Honestly really tough to answer. In normal conditions, we have always been able to say yes. With tariffs, trade wars and boycotts actively happening though, yet again we hit uncertainty…and the market hates uncertainty.
Market Answers: “We don’t know, or the Mag 7 makes less money” = Bearish
Market Asks: “Will GDP be growing or shrinking in 6 months?”
The Federal Reserve actually puts out GDP projections (see foot note, page 3)5. Normally, GDP just goes up rather naturally. Yet again, we have some of our first decreases in GDP growth rates. Again…no one has a crystal ball, and these are not guaranteed….but a forecasted trajectory downward in rates does not help the markets.
Market Answers: “GDP rate declining” = Bearish
GDP projections point downward and stagnant
Now you see, the only bullish factor we have going for us right now, is potential rate cuts…but those are grossly overshadowed by future projections of inflation, employment, corporate earnings and GDP growth rates. This is why, since November, I have been very bearish as each of these individual, future, economic variables pointed negatively. When these variables started to point bullish back in 2022…that is exactly when I began to pivot out of the bear market mindset. The market was leading those actual numbers.
Naturally, all of these variables can change at any moment, and at the end of the day, the market will do what it wants. However, this is the “artistic” side of thinking that I conduct, that has led to many accurate stock market forecasts. Putting my brain 6 months in advance, like the markets, and thinking how it thinks about the economic variables of the future. One additional note: if you find yourself uncomfortable…you are probably right in your prediction.
I hope this helps you. As always, questions are welcome in the chat. Thanks for stopping by!
https://www.weforum.org/stories/2015/10/why-economists-arent-wealthy/
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
https://tradingeconomics.com/united-states/interest-rate
https://www.oecd.org/en/data/indicators/inflation-forecast.html?oecdcontrol-68a15c79cc-var3=1971&oecdcontrol-68a15c79cc-var4=2025
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf