Question

Explain the relationship between economic cycle and market cycle? Why is the market cycle a good predictor of future economic conditions?

Answer 1

Economic cycle is the fluctuation of the economy between the periods of expansion and contraction. Factors such as GDP, interest rates, total employment and consumer spending can help to determine the current stage of economic cycle.

Market cycle also known as a stock market cycle is a wide term referring to trends or patterns that emerge during different markets or business environment.

Market cycle are the period between the two latest highs or lows of a common benchmark.

Economic cycle is crucial for businesses of all kinds because it directly affects demand for their product. High level of consumer spending business confidence, profit and Investment will also increase.

Unemployment tends to be low as economy creat s new job...

Market cycle or stock market cycle is indicator for the economy. It is performance does tend to correlate with the economy, but rather than a measurement of the strengthen and size of the overall economy.

It is a indicator of corporate profit and how fast investors expect them to grow. It anticipates a coming economic change and may decline if an economic downturn is coming and may increase if the economy is expected to improve.

All markets are subject to psychology of the masses and tend to overshoot and undershoot with high frequency trading, derivatives, leverage and programmed trading coming on the scene in recent decades