What's going on?

New economic data was released in the US that was worse than expected. ADP, a processor of private payrolls, announced that 189,000 jobs were created in March. This is below the 225,000 average expectation among market analysts. The US Institute for Supply Management released its measure of manufacturers' confidence in the economy. This month was the fifth consecutive month of lower confidence. These releases caused ripple effects in the market, pushing gold up, government bonds up, and the US dollar down.

What does this mean?

Markets are looking at this type of data to understand the longer-term picture for US growth and the shorter-term picture for US interest rates. This data indicates that growth will be lower than otherwise expected. This pushes investors to more stable investments like gold and government bonds, which is why those investments rose. The weaker economic prospects also mean that interest rate increases are more likely to happen later this year. Lower interest rates keep the currency lower, which is why the US dollar fell. Taking a step back from these daily moves, markets seem to be paying careful attention to market data these days. Investors seem concerned about the central bank�s balancing act. The central bank is looking to ensure that the economy does not run ahead of itself and generates too much inflation. At the same time, there is concern that premature interest rate hikes will choke off an economic recovery.

Why should I care?

As a US citizen, these daily moves will not greatly impact your life. The concern is rather how the above-mentioned balancing act will pan out. Hopefully central banks and investors will neither be too spooked or too complacent. If you live in other parts of the world, these moves become one step further removed. In the old days, investors used to say that if the US sneezes, the world catches a cold. After years of economic growth in emerging markets, this is no longer as true as before, but the path of the US economy still affects the global economy. As a private investor, you should focus on the longer-term prospects of the US economy, but also be aware that short-term markets are jittery about each data release. There seems to be great uncertainty associated with the coming interest rate hikes, which might lead to market volatility in the meantime. The key will be to pick a time horizon for your investments and keep your eyes on those longer-term trends while short-term markets fret about day-by-day data releases.