WMS Market Analysis & Trends 2

Question 1

Which economic indicator is considered a LEADING indicator of future economic activity?

Accepted Answer

Building permits

Answer

Building permits are a leading indicator because they signal future construction activity and economic expansion before it occurs.

Question 2

A yield curve inversion — where short-term rates exceed long-term rates — most commonly signals:

Accepted Answer

An impending recession

Answer

An inverted yield curve has historically been a reliable predictor of economic recession, typically occurring 6–18 months before a downturn.

Question 3

In technical analysis, a 'head and shoulders' pattern is generally interpreted as:

Accepted Answer

A bearish reversal signal

Answer

The head and shoulders pattern is a classic bearish reversal formation indicating that an uptrend is likely ending.

Question 4

The Shiller CAPE (Cyclically Adjusted Price-to-Earnings) ratio uses earnings averaged over how many years to reduce cyclical distortion?

Accepted Answer

10 years

Answer

The Shiller CAPE uses 10 years of inflation-adjusted earnings to smooth out business cycle fluctuations and provide a more stable valuation measure.

Question 5

When the Federal Reserve uses open market operations to purchase Treasury securities, this policy action is intended to:

Accepted Answer

Increase the money supply and lower interest rates

Answer

Buying Treasury securities injects reserves into the banking system, increasing the money supply and putting downward pressure on interest rates.

(WMS) Wealth Management Specialist Certification Practice Test