选项

问题如下：

Which of Ferguson’s observations about equities and business cycles is most likely correct?

选项：

A.Observation 1

B.Observation 2

C.Observation 3

解释：

A is incorrect. Observation 1 is incorrect. While toward the end of a recession (and sometimes while the recession is still in place) sharp increases in corporate profit growth tend to occur as expenses have been cut and profits quickly respond to any increase in revenue, this would not result in a negative risk premium.

B is correct. Observation 2 is correct. Profits of cyclical companies typically pick up before signs of a broader economic recovery is evident, and as a result, they are often used as a leading economic indicator.

C is incorrect. Observation 3 is incorrect. Equities are generally not a hedge for bad consumption outcomes (which occur in a recession).