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Stock-Market Gyrations and Investment

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The worldwide stock-market decline on October 19 has increased uncertainty about future changes in employment and output both in the United States and abroad. Part of the reason for this uncertainty is that changes in the level of equity prices have been one of the best leading indicators of economic activity (Moore, 1980). In particular, the stockmarket decline may affect consumer spending and business purchases of plant and equipment.

The worldwide stock-market decline on October 19 has increased uncertainty about future changes in employment and output both in the United States and abroad.

Part of the reason for this uncertainty is that changes in the level of equity prices have been one of the best leading indicators of economic activity (Moore, 1980). In particular, the stockmarket decline may affect consumer spending and business purchases of plant and equipment.


Suggested citation: Osterberg, William P., 1987. "Stock-Market Gyrations and Investment," Federal Reserve Bank of Cleveland, Economic Commentary, 12.01.1987.

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