Why Investors Should Trust Hard Data More

The apparent conflict between hard U.S. economic data, which look weak, and soft data, which look strong, adds considerable uncertainty to the outlook. Investors are confused and distracted by the conflicting information, finding it difficult to understand why the Federal Reserve might wish to hike interest rates three times -- or more -- this year. They shouldn't be.

Survey-based soft data are described that way for a reason, which is that they are just a qualitative measure of how people feel or judge the outlook, but are not necessarily indicative of how they behave. Hard data quantitatively measures actual behavior or economic performance. That’s real and informative of how the economy is performing. To paraphrase George Orwell, some data are more equal than others and we should be paying far more attention to reports we know are most accurate.