GDP and Market Trends The current prospects of the gross domestic product are encouraging. GDP is on the rise at a staggering rate. As stated by the commerce department “economic growth surged in the first quarter at its fastest pace in more then two years.” GDP has been on a comeback with a vengeance, coming in at a 5. 8 annual percent a full point higher then expected economic analyst are enthusiastic of the rest of the year.
Corporate America is also enjoying the boost in the economy with 86% of the S&P 500 companies coming in even or above wall streets forecast for the first quarter. Although economic growth is surging it is not expected to keep at its current pace. In one strategist’s opinion (Ned Riley) ” In the short term the market should flourish, then very sluggish economic progress.” Regardless of the speed of the expansion, it is all but inevitable throughout 2002. With this rapid expansion comes the chance of a double dip, sliding back into a recession, but according to James Cooper and Kathleen Madigan, writers for Business Week, write “that there is no danger of a second recession.” With GDP on the rise, the surging economic activity, the FED lowering interest rates, and charts of the business and economic cycles I believe that we are on the upside of the recession and coming out strong. With the factors that are in place the market markets rise should slow but it will continue.
Economic Factors, Indicators and Forcast Interest rates have been dropped to historically low levels to help bring the economy out of recession, and is having a great impact on the economy as a whole. With lowered in interest more people will be taking out loans and spending money they would not have with the previous interest rates. This puts a boost in the economy by putting in extra money, which people will then spend on goods and services with becomes income for others which then leads to more demand for products, then more manufacturing, and eventually the whole economy is lifted from lower interest rates… or at least this is the plan. All of these indicators say to me that the economy is coming out of the recession with strong force, and it may not continue its current speed of expansion but I believe that unless there is an extreme event the economy should continue to recover and grow at a normal rate. Stock prices are back on the rise, businesses are recovering, and the low interest rates are stimulation the economy.
The Term Paper on Australian Monetary Policy Money Rate Interest
... setting the interest rate on overnight loans in the money market. Other interest rates in the economy are influenced by this interest rate to ... stimulating or discouraging spending on goods and services. Economy-wide recessions and booms reflect fluctuations in aggregate demand rather ... over 2001. (Asia-Pacific Economic Cooperation, 2002) 1. 1 Real Gross Domestic Product Real GDP increased 2. 6 percent ...
I see no reason to think that the economy will not continue on its current path, if not get stronger. With all of the factors before mentioned I think that now is a good time to invest because of the promise of the market and low stock prices. Initially because of the recession stock prices plummeted but now they are back on the rise and if you had bought the stocks soon enough you could have made a nice profit. Also most stocks are still not back up to their pre September eleventh price so it would still be beneficial to buy now.
In the short run stock prices may fluctuate but in the long run I believe that the stock prices will rise as the economy continues to work its way out of the recession. Projections For 2002 GDP- GDP has been on the rise at an astounding rate for the first quarter and I expect it to continue at a slow rate. Inflation- Inflation has been on the rise but with the FED lowering interest rates I don’t see it continuing to climb much more, and as the economy strengthen it should drop back to a normal level. Unemployment- Unemployment is also up from the last month but that is common in a recession. I see the unemployment level dropping as the economy builds itself back up and businesses regain confidence.
The Research paper on Dividends Policy And Common Stock Prices
The issue of how much a company should pay its stockholders, as dividend is one that has been of concern to managers for a long time. The optimal dividend policy of a firm may be defined as the one that increases shareholders wealth by the greatest amount. It is therefore necessary, to understand the nature of the relationship between dividend and value of the firm. It is in the light of this that ...
Corporate Earnings- With GDP and stock prices on the rise I expect to see corporate earnings to also rise. Not only are stock price going up but 86% of S&P 500 companies have posted results that meet or exceeded Wall Streets expectations. I see all theses factors Leading towards higher corporate earnings. Interest Rates- The FED has no plan to change rates over the next 12 months but in the long run as the economy builds they will gradually rise. Technology Field For the past two years the there has been a slow down in the technology field. Analysts speculate that this is because the industry is maturing.
The slow down is partially caused by the level of sophistication of software programs today. The upgrades that are offer only marginal improvements and companies are not finding them necessary to purchase. This aspect of the slow down will continue until new innovations drive the need for replacement. Despite the slow down there is a recovery in the future. For 2002 there are projected rises in IT services (5. 6%), software (6.
7%), and hardware (1. 7%).
The increases are expected because companies will continue to spend on advanced software that can optimize their opportunities, also when companies use technologies for CRM and ERM it pays for itself. Recovery is inevitable because of the huge cut backs in inventory and overhead that many producers have implemented. Due to the increase in economic activity the producers will be building their inventories to meet the new demand. This will create more business for the Tech sector increasing its economic activity.
There are also global factors that also play a part in the technology industry. If the slump that is effecting the Japan market hits the rest of Asia there is no telling what will happen with the technology sector. Microsoft and Intel More specifically with the two companies I did more research on in the tech sector I feel that they rode the fall and now rise with the rest of the market and are on the road to business as usual. The charts of these two companies are almost exact copies of the market over the past year. They fell in September and then rose back afterwards, as did most strong companies. I feel that the two companies that I choose may not be the best representation of the sector because they are both at the top of their respective fields, be it through brilliant innovations or monopolistic practices both are industry leaders.
The Research paper on Information Technology Companies Power Technologies
IN 1968, a young Intel engineer named Ted Hoff found a way to put the circuits necessary for computer processing onto a tiny piece of silicon. His invention of the microprocessor spurred a series of technological breakthroughs -desktop computers, local and wide area networks, enterprise software, and the Internet -- that have transformed the business world. Today, no one would dispute that ...
They don’t feel a lot of the impacts from recession that smaller or struggling companies do. Regardless I feel that both companies have a good future ahead of them and will survive the recession.
