Question

The S&P 500 has been increasing steadily over the last several months. What does this signal about how investors view future profits? Investors believe future profits are unpredictable. Investors believe profits have been higher over the past few months than they are expected to be in the future. Investors believe future profits will be lower than previously expected. Investors believe future profits will be higher than previously expected.

Answer 1

Answer: Investors believe future profits will be higher than previously expected.

Explanation:

If the S&P 500 has been rising, this means that investors are buying more shares in the companies in the index.

This means that these investors believe that the profits to come to these companies is going to be higher than expected. If the profits are expected to be the same as previously thought then there would be little increase in stock prices because the relevant increases would have already occurred.