A market timer now believes that the economy will soften over the rest of the year as the housing market slump continues, and she also believes that foreign investors will stop buying U.S. fixed-income securities in the large quantities that they have in the past. One way the timer could take advantage of this forecast is to ________.

Question

Quizplus · Accepted Answer

The timer expects the economy to soften, which could negatively impact stocks, so selling stock-index futures is advisable. Additionally, if foreign investors stop buying U.S. fixed-income securities, bond prices may fall, so selling T-bond futures is also a strategic move.

A Market Timer Now Believes That the Economy Will Soften