Reading the article: Ben Leursdorf and Aaron Kuriloff: “Stocks surges as optimism rises”, March 2, 2017, the Wall Street Journal, New York, NY. Writing a economics journal:
- TOPICS: Market Price
- FORMAT:
1) Summary: briefly summarize your chosen article.
2) Critical Analysis: critically analyze it using your own words.
3) Critical question: pose a significant question from your article.
Solution
SUMMARY
The article, by Ben Leursdorf and Aaron Kuriloff, asserts that the stock market reflects the confidence of investors in the economy. If investors are optimists, the stock market performs exceptionally; however, when the economy is in crisis and investors are disenchanted about the economy, the stock market performs poorly. As per statistics, the Dow industrial surged abnormally, around 300 points, which reflects investor’s confidence in Trump Administration and Federal Reserve’s policies. Since 1999, it is the most unusual and exceptional performance of the Dow industrial, which demonstrates that United States’ economy, is finally out of recession (fully). The article also reveals that as inflation is about to swell, the business community is selling government bonds, which will further intensify economic activity (Leursdorf and Kuriloff:).
CRITICAL ANALYSIS
It is true that stock exchange reflects the confidence of private investors regarding the economy. For instance, when an economy is an upswing, the value of stocks surge; however, when an economy is in crisis, the stock exchange performs badly, and the value of stock deteriorates.
Despite this obvious correlation between the economy’s performance and a surge in stock values, there is little evidence regarding the impact of the exceptional performance of the stock market, such as Dow industrial, on the economy. It suggests that the relation between stock exchange performance and prevailing economic conditions is one-directional; the only economy impacts stock exchange or the stock market. Therefore, we can say that the stock market is a gauge to understand mood or optimism regarding changes in the economy.
The article focuses only on the aspect that possible positive changes in the economy, such as intense economic activity and healthy inflation, positively influence stock market (Dow). It does not discuss, to an extent, how the surge of 300 points at Dow Industrial would affect the United States’ economy.
CRITICAL QUESTION
Does the stock market affect the economy of a country (GDP)? If it does, what is the nature of the relationship and size of the impact of stock market activity on the economy of a country (GDP)?
Work Cited
Leursdorf, Ben and Aaron Kuriloff:. “Stocks surges as optimism rises.” Wall Street Journal. Wall Street Journal, 2 March 2017. Web. 20 May 2018. http://online.wsj.com/public/resources/documents/print/WSJ_-A001-20170302.pdf.
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