For investors looking to get more involved managing their portfolio and willing to spend some extra time doing research, here is a resource for some of the best macroeconomic data available (And it’s FREE!)
The St. Louis Federal Reserve offers investors every piece of economic data you could imagine. In addition to many regularly published newsletters and research papers, their FRED (Federal Reserve Economic Data) database offers investors over 159,000 different data series. From acreage data of America’s top 10 agricultural crops to zinc ore stockpiles, investors can find all the information required to make informed investing decisions for free on the Federal Reserve’s website.
The FRED database can be found on the Federal Reserve Bank of St. Louis’s website here: http://research.stlouisfed.org/fred2/
Let’s take a quick tour of all the information available to investors and see the different ways to use the data.
On the homepage you can see some of the most popular data series; CPI, GDP, unemployment, etc.
Click on the Categories tab to view a list of all the data available. For this example we going to look in the “Money, Banking and Finance” category, specifically in the “interest rates” section, and look at the current average 30 year mortgage rates. Notice there are over 150,000 series available, this is just one example.
Once your desired data is selected, you have a lot of options. In the top left of the page you can click the link to download all the data in the graph into a spreadsheet. Or you can click “Edit Graph” to open up options to transform the data by changing the charts frequency, units or dates. For example the chart above shows the average 30 year mortgage interest rate, but we can easily make it show the change in interest rates year over year (YOY) instead:
Or, you can compare the data to other data series available by clicking the “add data series” tab. Let’s compare the historic 30 year mortgage interest rates to interest rate the U.S. Government pays to borrow for 30 years (The 30 year treasury yield):
This is the basic operation of the FRED data series. Obviously there are millions of different charts you could create.
How is FRED useful?
Maybe you don’t care about how mortgage rates compare to U.S. treasury yields, but there is certainly some information applicable to you.
Maybe you own municipal bonds in a taxable brokerage account and you want to see the spread of the bonds to determine if it would be beneficial to sell those for U.S. treasury bonds or U.S. corporate bonds.
Maybe you own stock in a bank or banking ETF and want to see how the fundamentals of the bank or sector has a whole stack up.
Maybe you own stock in a homebuilder and want to see what rising interest rates mean for new home starts.
The possibilities are endless.
FRED in Excel
Besides using FRED’s website, the data can also be automatically uploaded into excel with the FRED Excel add on.
The add on for Microsoft excel can be found here: http://research.stlouisfed.org/fred-addin/?utm_source=research&utm_medium=website&utm_campaign=data-tools
Installation instructions are also found there.
Once you have the add on installed, you can instantly bring up the data for any of the data series in Excel:
Select the desired data series, and click the “Get FRED Data” button:
Now all the data is at the hands of Excel to do whatever you like. Excel is a very powerful tool for anything from basic calculations to full scale financial modeling. Using excel as part of your investing research and portfolio design will be covered in detail in later posts. But for those looking for a great resource on learning how to use Excel to benefit your investing analysis and portfolio strategy, check out Advanced Modelling in Finance using Excel and VBA (The Wiley Finance Series)
Some of the most popular series to get you started:
Play around with the FRED data yourself and see what you can find. How has the stock market performed in previous periods of rising interest rates? No inflation? High unemployment? The answer to all these questions are just a few mouse clicks away.
