We know that the market should respond positively to good news and that good-news events such as the coming end of a recession can be predicted with at least some accuracy. Why, then, can we not predict that the market will go up as the economy recovers?

Question

Kendrick Ibarra

Business

14 January, 13:06

We know that the market should respond positively to good news and that good-news events such as the coming end of a recession can be predicted with at least some accuracy. Why, then, can we not predict that the market will go up as the economy recovers?

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Answers (1)

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Genevieve Clarke · Answer 1

Trade markets will always respond positively to good news about the economy, and they get the good news before anyone else. If economists can predict that the economy is recovering from a recession, the stock market already knows about it and has already adjusted the prices much before the general can even guess what is happening. Only if the recovery was better than expected or worse than expected, will stock prices adjust again to the new economic scenario.