Three Likely World Events…..Pg.2
Prediction With the consistent rise in Canada’s GDP and the expansion in consumer price index and the TSX it’s become aware to me that the Canadian economy is going through expansion. Being the phase of the business cycle where the economy moves from a trough to a peak. It is a period when business activity surges and GDP expands until it reaches a peak. An expansion in the economy is marked by an improvement in production and use of resources. During expansion, consumer spending is growing, especially for purchases of big-ticket products. Although interest rates are moderately low at the beginning of an expansion, they normally rise as the economy grows. Stocks that perform well during expansion include technology companies, auto companies, and cyclical industries such as steel manufacturers and construction companies. From a professional analysis given by CTV it shows that the unemployment rate in Canada will continue to slim down to average 6.9% by 2014. This even further proving Canada’s expansion. RBC chief economist Craig Wright says he believes the global economy ready to start accelerating again in the year of 2013, which will benefit markets in Canada and help to expand the economy even further.
Three Likely World Events
With the Canadian economy constantly riding along an economic cycle, influenced by many national and international events, there are numerous occurrences that could shatter the predictions I have made for Canada’s current economic situation. Three events that would have great influence on both Canada’s economy and the American and Canadian stock market are; recession, a world war or huge natural disaster.
In the occurrence of a recession the Canadian economy and the stock markets in America and Canada are held at jeopardy. In the beginning of a recession, companies begin taking cost saving measures as a way of saving profitability and quarterly statements. Of the many measures employers pass, job cuts fall among the most effective and the most devastating. Because payroll is often the most expensive item of any organization's expenses, reducing the overall number of paid positions can significantly reduce the company's expenses. With employers making major cuts it can affect the overall economy of a country. This can be damaging to the stock market because with unemployment on the rise and people in need of money they will usually opt out of all their investments and cash them in for whatever money they can get their hands on. With the prices of stocks plummeting, investors monitor the stock prices of healthy companies. When the stocks of these companies reach low prices, investors will buy all available shares in attempt of selling them for a profit when the company recovers. Investors can help with an economic rebound by doing so. It helps the organization regain profitability, create jobs and rehire old workers. As the company recovers, investors sell the stocks for higher prices; they collect a profit and improve the overall economy.
If another big war were to occur raw materials and factories would be turned over for the manufacturing of war goods, such as tanks. This would then be reducing the production of consumer goods. Shortages can be the leading cause of a rise in the black market. Foreign trade would likely be interrupted. Other countries may choose to put a stop on all trade; imports of luxuries will slow down as priority is given to importing military equipment. Even ships that are transporting goods may be sunk due to the battle fields. If conscription is forced there will be an increase on the labor market. With methods of borrowing and taxation the government will have to pay the cost of the war. The stock markets in America and Canada would be affected directly as it…