Stock market Essay Example | Topics and Well Written Essays - 2500 words

Stock trade - try on ExampleGross Domestic Product is the total securities industry value of all the final goods and work produced within a nations borders in a given time period. Each goods and services produced and brought in the market pitch a price. The price of the total output is called as GDP. It can be measured by either cumulating all the income earned in the saving or all the spending in the economy and both measures should roughly equate to the same total. GDP is the basic measure of an economys size. With the GDP used as a key indicator of economic activity and future economic prospects, any significant wobble in the GDP, either up or down, can have a major effect on stock market investors sentiment. If investors believe that the economy is improving, and corporate earnings improving along with it, then they are more likely to bid stock prices to higher levels. Conversely, an actual or expected decline in GDP is very likely to run in parallel or in advance to a de clining stock market. There is an alternative view to the interplay between GDP and the stock market. The stock market itself may asseverate a reverse effect on subsequent economic activity a turn back in the market may erode personal wealth, real or perceived, such that individuals will tip spending. With consumer spending representing around two-thirds of GDP, even a small change in consumption can exert significant negative effects on GDP. This is referred to as the wealth effect, where if investors feel poorer, they will cut short spending, thereby decreasing GDP and further exacerbating an already declining market. The Housing Market The housing market is one of 10 leading economic indicators and a good measurement of discretionary spending by the general public making up 5% of the value of the overall economy. When the economy is up, tribe have a tendency to spend more and housing permits and sales are good indicators of this trend. When the economy slows people spend an d building and buying will have a tendency to decline. The concern in the reliable housing market is with the recent surge in defaults with sub-prime loans. This trend is a major factor in the current decline of the housing market which can act as a deterrent to emersion and can cause a ripple effect in the rest of the economy.