The Oxford Global Economic Model suggests a 10% change in stock prices alters the level of GDP in the G7 countries by around 0.3% on average after two years.
A 25% equity correction would potentially cut US growth to around 1% by 2019.
The risk of such a damaging stock price slump could prompt early Fed action to restrain markets, if valuations continue to stretch.
Source: Oxford Economics, WSJ
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