Capital MarketsQuestion 358 of 398
Which of the following statements about the relationship between the economy and the stock market is MOST accurate?
a.Stock prices always move exactly with current GDP
b.The stock market is considered a lagging indicator
c.Stock prices are unrelated to expectations about the economy
d.The stock market is considered a leading indicator, often reflecting investors' expectations about future economic conditions
Explanation
The stock market is generally treated as a leading economic indicator because prices reflect investors' expectations about future earnings and economic conditions. As a result, the market often turns before the broader economy does.
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