Seldomly used in isolation, economic indicators give investors an idea of an underlying trend and can suggest whether one asset class should perform better than another. Three important and popular indicators are as follows:

1. ISM (Institute for Supply Management). This leading indicator tells us about economic activity in the manufacturing sector. When this indicator expands, it signals that manufacturing is growing, a good sign because companies typically will not manufacture goods if there is no demand. Growth in the ISM over several months (it grew for 8 straight months as of March 2010) tells investors that manufacturers are seeing more demand for their goods. Clearly, this sector is going to enjoy better profitability and can make for an attractive investment.

2. Retail Sales. This coincident indicator tells investors about consumer spending habits. When retail sales are low, investors see that as a sign that the economy has slowed down. When retail sales increase, they interpret that as a sign that people are now willing to spend discretionary income on retail purchases, a good sign for retailers and other vendors, suppliers, manufacturers, etc. of discretionary goods and services.

3. GDP Growth. This is arguably one of the most important coincident indicators for a country's economic health. Over periods of continue growth, indicators suggest that a country is well on its way to economic strength. This tells investors that overall the economy is growing and most companies are enjoying profits. When GDP growth slows or is negative, it could signal a slowdown in economic growth or an outright recession is just around the corner.

Of course there many other economic indicators available to investors who want to predict the future. Understanding these three is a good starting point for many. However, for investors who would prefer to expand their knowledge and get to know more about the other different types of indicators, almost every Economics textbook will provide at least a general overview of almost indicator out there, what it means for the overall economy and how it might impact any given asset class (e.g. equities, bonds, etc.).

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Chris has more than 17 years of financial services experience. In addition to being the Fund Advisor for the Mutual Fund Site.org, he manages a website about the Best Queen Size Mattress at Best Queen Size Mattress.com.