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Use the stock market as a leading indicator

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Question: From September 2000 to March 2001, the S&P 500 index fell 27% and the US economy headed into a recession. From March 2002 to July 2002, the index fell another 27%, yet this time the recovery that was already underway continued. Based on these events, explain why you would or would not use the stock market as a leading indicator to predict a recession the next time it falls sharply.

Reference no: EM131737829

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What happens to the value of the dollar : You are a manager for a firm in an industry where prices have been flat for the past several years. The rate of inflation now rises from 2% to 4%.
How would change the business strategy : In the 1970s, a big increase in the Federal budget deficit was not offset by higher interest rates, so the rate of inflation tripled.
How does us economy increase in the core rate of inflation : The US economy did not have any increase in the core rate of inflation in 1999-2000 with the economy at full employment; instead, it had a stock market bubble.
Forecast for real growth-inflation and imterest rates : As a manager, the following facts are in your possession at the end of ‘‘this'' year and you are asked to predict the changes in the economy ‘‘next'' year.
Use the stock market as a leading indicator : From September 2000 to March 2001, the S&P 500 index fell 27% and the US economy headed into a recession. From March 2002 to July 2002, the index fell another.
Discuss the different methods of predicting inflation : The material in this chapter did not focus on different methods of predicting inflation because the core rate has changed very little since 1982.
Describe the series in generating forecasts : The LEI, consumer expectations, and ISM (then NAPM) surveys all predicted a much more robust recovery in 1991-2 than actually happened.
How would the announcement affect sales : Suppose the dollar is overvalued by 20% and the Secretary of the Treasury announces that he hopes it will soon return to equilibrium.
Determining business plans ahead of any recession : After increasing steadily for several years, the LEI turns down by 0.5% one month. What other factors would you examine in determining whether to curtail.

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