Chapter 17 – Macroeconomic and Industry Analysis
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CHAPTER SEVENTEEN
MACROECONOMIC AND INDUSTRY ANALYSIS
CHAPTER OVERVIEW
This chapter discusses the broad-based aspects of fundamental analysis—macroeconomic and industry
analysis. The analysis is placed in a global context, as markets are becoming more globalized. The
LEARNING OBJECTIVES
Upon reading this chapter, the student should have a thorough grasp of the macroeconomic factors that
PRESENTATION OF MATERIAL
17.1 The Global Economy
Fundamental analysis will often begin with analysis of the economy, as the global economy will have an
17.2 The Domestic Macroeconomy
17.3 Demand and Supply Shocks
Analysis of the economy will often distinguish between demand and supply shocks. A demand shock is
17.4 Federal Government Policy
This section describes how major government policies influence the economy. Fiscal policy involves
Chapter 17 – Macroeconomic and Industry Analysis
17.5 Business Cycles
A business cycle refers to periods of expansion and contraction. A peak is the high point following a
period of economic expansion. A trough is the low point following a period of economic decline.
Companies can be very sensitive to the cycle or they can be defensive companies. Cyclical companies are
17.6 Industry Analysis
Industry analysis identifies industries that are expected to perform well in the future. Some industries,
such as capital goods are very sensitive to economic performance. The sales of capital goods industry are
heavily influenced by the performance of the economy. Manufacturers do not purchase capital goods for
expansion if the economy is not predicted to perform well. In addition to sales sensitivity, industries that