money Archives

Oct 10

Euro Currency – Will It Continue to Fall?

By Mark Waggoner Currencies, Currency, Investing No Comments

Euro Currency burning value is of concern to many

The Euro currency (Euro FX) has been a volatile for the past few years. However, that hasn’t stopped the steady slide of the Euro against most other major currencies. The reasons why it is still falling are numerous and include everything from political instability to economic, and geopolitical concerns. Even though many people see this as a bad sign, there are plenty of reasons why the Euro will continue to fall. Here are six of them:

The Euro currency is struggling to keep up with the U.S. dollar.
The Euro currency has been falling against the U.S. dollar for some time, and it doesn’t look like the trend will end anytime soon. The cause of the drop is for a variety of reasons. One of the major points is the different economic outlook between Europe and North America. Many economists in North America expect their economy to continue to improve. However, economists in Europe are largely expecting the economy to remain stagnant or even worsen. This difference in outlook will likely lead to continued weakness of the Euro against the dollar.

Economic Concerns About the EU Member Countries
The Euro currency struggles to stay afloat in part because of the economic concerns about the EU member countries. Because the Euro currency is the common currency for the EU, any economic problems in one member country may eventually affect the Euro Currency. The countries in the EU are not all in the best economic shape right now. Economists are becoming concerned about the recent government spending in the European Union. This has led to many investors selling their Euro in favor of the U.S. dollar or other currencies. This is one of the major reasons why the Euro will continue to fall.

Opposite side of the coin: US Dollar Strength as Interest Rates Rise

The Euro currency and oil – A contributing factor
Oil is traded in US dollars. That means European countries buying energy must sell their Euro currency and buy US Dollars to purchase oil. The recent OPEC+ meeting concluded that cutting 2 million barrels a day to raise prices will further contribute to worldwide inflation adding more fuel to the fire (no pun intended). Elevated energy prices are increasing the potential problem with no end in sight.

The European Union Is Propping Up Failing Banks with Taxpayer Money
Many banks in Europe that are considered too big to fail (sound familiar). This is leads central banks to use taxpayer money to prop up these failing institutions. This will likely cause the Euro to continue to fall.

The Euro Currency Has Been Sliding Against the US Dollar For Years
Another reason why the Euro will continue to fall is because it has been sliding against the US dollar for years. This is likely to continue and may even accelerate over the coming months. The US is aggressively raising rates. The European Union is also, but nowhere near as aggressive. This makes the US dollar look more enticing than the Euro currency for investors.

The US Dollar is likely to continue to gain strength
Another reason why the Euro will continue to fall is that the US dollar is likely to continue to gain strength. However, that has changed in the past few years. The Euro has been losing strength while the US dollar has been gaining strength. Varying factors are to blame. One of them is the different economic outlook between Europe and North America.

Conclusion
The Euro has been a volatile currency since its inception. We must examine the contributing factors, from Covid to Russia, energy costs and tariffs, influx of refugees and Brexit. Selling the Euro currency short now may be one of the smarter bets we’ve seen in a while. FEL-PM-221006

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Sep 02

Examination of the influence of the US Dollar in the markets today

US Dollar Strength as Interest Rates Rise

By Mark Waggoner Currencies, Currency, Federal Reserve, Interest rates, Investing No Comments

US Dollar strength is influenced by the Feds interest rate policies

US Dollar strength has been energized by higher rates since the beginning of 2022. Good news for you if you’re long. A stronger US currency makes it cheaper to import foreign goods and services. On the other hand, it can cause weaker export demand. Domestic manufacturers may see slowdowns in exports. It may also ease inflation pressures. With the Federal Reserve expected to continue raising interest rates this year, it may be good news for dollar bulls and bad news for bears…for now.

Higher Interest Rates Bolster the Dollar

The U.S. dollar is the most recognized financial investment in the world. It is a safe-haven asset, utilized in times of market stress. Now that the U.S. economy is currently growing at a decent clip, we can expect the Fed to increase interest rates in the coming months. Higher interest rates should help to control inflation and boost the value of the dollar.

Federal Reserve Focus is On Inflation, Not Recession Fears

The Impact of a Stronger USD

A stronger currency can have several negative consequences for the economy. A rising greenback makes U.S. goods more expensive on the global market. This may lead to weaker export demand. This strength can also lead to reduced demand for U.S. goods and services, which are priced in dollars. Additionally, a rising dollar can create inflationary pressures, as a stronger currency can make imports cheaper. In time, its strength could limit growth, as it becomes more expensive for American companies to import goods. A weaker dollar could lead to increased inflation, as goods and services become more competitive on the global market. Weakness in the US Dollar would also be a boon to exporters as foreign demand for American goods picks up.

Long-term Outlook for U.S. Dollars Value

A rising interest rate environment is typically positive for the dollar, which is why it’s important to take a long-term view when investing in the greenback. While it’s true that our currency is likely to appreciate in the near-term, it’s also important to consider how it will fare over the next decade. There has been speculation of other alternatives to replace the US Dollar as the reserve currency, but we don’t see this happening anytime soon.

Is it Time to Buy USD?

If you believe that the U.S. economy will outperform other economies, then it may be a good time to buy the USD. First, determine whether it’s overbought or due for a correction. What is its current trend? Try to gauge public sentiment by monitoring the most recent headlines. If you see more positive headlines regarding the U.S. economy, it’s likely that the dollar will continue to appreciate.

US Dollar Chart

Bottom Line

Investors should always monitor the U.S. dollar’s strength. Significant strengthening in USD can lead to economic weakness. The dollar’s strength is largely dependent on interest rates, so investors should keep an eye on Fed policy. If you believe that the U.S. economy will outperform other economies in the future, then it’s a good time to buy the U.S. dollar. FEL-PM-220831

Aug 19

FOMC: Are Investors Underestimating Fed’s Resolve

By Mark Waggoner Federal Reserve, FOMC, Interest rates, Investing, Stocks No Comments

FOMC: Investors May Be Underestimating Fed's Resolve

The Federal Reserve is poised to raise rates yet again

‍The Federal Open Market Committee (FOMC), otherwise known as the Federal Reserve or Fed, has proven its resolve to normalize monetary policy by raising interest rates. You may have read that many investors are underestimating the central bank’s resolve in its upcoming meetings. Several recent statements from voting FOMC members have indicated that more rate hikes are inevitable. Its focus, reducing inflation. As a result, they will continue to tighten monetary policy even if equity markets react negatively. What should our next steps be as investors?

Why Investors Are Underestimating the Fed’s Resolve

There are a few reasons why investors are underestimating the FOMC resolve. We have been expecting the Federal Reserve to pause in the face of a potentially volatile correction. Recent experience tells use when things go haywire with the markets the Fed jumps in and lowers rates. This has been true, but we have not had inflation in the equation. The Fed-funded survey of business confidence has shown signs of weakening, which may give the Fed pause in its decision-making.

The key role of unemployment in the Fed’s decision-making

There are reasons to believe that the FOMC is prepared to continue its rate hiking campaign. Consider the Fed’s primary focus, inflation, and the trajectory of the labor market. The Fed’s tightening campaign has been dependent on the state of the economy. Since the beginning of 2022, the Fed has been steadily reducing its balance sheet, which has kept the central bank on track with its plan to normalize monetary policy and bring an end quantitative easing.

See: Federal Reserve Focus is On Inflation, Not Recession Fears

Equity market implications of anticipated rate hikes

Short-term implications of higher interest rates may be bearish for stocks. Equity markets have been supported by an accommodative monetary policy, which has allowed companies to issue debt at record low rates. As rates are raised, the higher costs may weigh on company earnings as companies issue more expensive debt. You may have noticed that the yield curve is inverting, an indication that investors expect lower growth in the future. This inversion may be a signal of a market correction or recession in the not-too-distant future.

Potential Fallout

Higher rates negatively impact fixed-income investors, as higher rates may put downward pressure on bond prices. As the Fed continues rate hikes, it puts pressure on the short-term rates, making it difficult for borrowers to service their debt. Higher rates may increase the U.S. dollar value. This hurts U.S. companies that derive their revenues from abroad.

The Importance of Understanding the Fed

The Federal Reserve has a dual mandate of maintaining full employment and keeping inflation in check. The FOMC may be approaching its intended goals on inflation. The Fed’s survey of business confidence has shown signs of weakening in recent months, which may indicate that the Fed is approaching its employment goal. The FOMC seems eager to hike rates and end its stimulus campaign. Expect continued market volatility. As investors, we must prepare for the Fed’s continued rate hikes. We should strive to understand its decision-making process and adjust our investment strategies in a rising interest rate environment. FEL-PM-220819

Aug 04

Financial markets today may be influenced by the political climate.

Financial Markets Today and the Political Climate

By Mark Waggoner Interest rates, Investing, Stocks No Comments

Financial markets today may be influenced by the markets perceived political climate.

Financial markets today can be heavily influenced by the political climate. What’s going on in Washington, D.C., and other world capitals can have a big impact on how investors feel about the economy and how they respond to new information about stocks and bonds. If you want to invest wisely for the long term, you need to understand how political factors can affect financial markets and what that might mean for your portfolio. In this article, we explore how political climate affects financial markets so that you can make smart decisions with your money no matter what is happening politically.

What is the Political Climate?

There is no exact definition for the political climate, but it broadly refers to the general political environment. This includes issues such as the overall stability of the government, the strength of the economy, and the amount of administrative pressure on the government. The political climate is closely related to the economic climate, which refers to the general state of the economy. This environment can, and will, shift over time, so it’s important to monitor developments closely. If you want to invest wisely, it’s important to understand how political factors can affect financial markets and what that might mean for your portfolio. In addition to closely monitoring the political climate, it’s also important to track economic indicators, such as employment rates and inflation rates, as they affect financial markets and your investing decisions.

The Importance of the Political Climate to Financial Markets

The political climate is important because it can have a significant impact on financial markets. Political events can cause short-term fluctuations in the stock market, and longer-term changes in the political climate can affect stock prices, interest rates, and other financial indicators. Political uncertainty can cause investors to become more cautious and less willing to take risks. This could lead them to sell stocks and invest in less risky assets, such as government bonds. Either of these moves could cause the value of stocks to go down and lead to a drop in bond prices. Meanwhile, investors might become more willing to take risks, which could lead them to buy stocks and increase the demand for bonds. This could cause the value of stocks to go up and lead to a rise in bond prices.

How the Political Climate Affects Financial Markets

When political events occur, they can have an impact on the financial markets. Investors respond to these events by adjusting the risk they take. If investors become more cautious, they will shift their portfolios toward less risky assets. If investors become more aggressive, they will shift their portfolios toward stocks. The following are some examples of political events that could cause investors to shift their portfolios: – The government could enact new legislation, such as tax laws, new regulations, trade tariffs, or other legal changes. – There could be a change in the leadership or a major administrative change, such as the appointment of a new cabinet member. – There could be a significant change in the geopolitical climate, such as a change in relations with a foreign country. – There could be an unexpected event, a natural disaster or a significant economic report that causes investors to become more cautious or aggressive.

Inflation is a worldwide phenomenon

Inflation is one of the biggest threats to long-term investors. It happens when there isn’t enough goods and services produced to meet the demand. Prices for goods and services rise as a result. Inflation is the rate of price increase for a basket of goods. When prices rise, a dollar buys less. Inflation has the potential to erode an investor’s purchasing power because it reduces the value of current and future investment returns. With a stronger economy, there is a larger demand for goods and services. To meet this increased demand, companies raise their prices, which causes inflation. Inflation is more of a global phenomenon than a purely political one. It’s not something that is solely decided by the government. Inflation is a more natural part of human economic behavior. Financial markets can then be affected as investors predict that central banks may intervene.

Election Cycles and Market Timing

The political climate plays an important role in the timing of financial market decisions. Investors may be more or less likely to sell stocks, buy or sell bonds, or change investment strategies depending on the political climate. Investors may be more likely to sell stocks or shift their portfolios toward less risky assets during an election year, when there is additional political uncertainty. The reasoning behind this phenomenon is that investors may be concerned about a change in government leadership, which could affect the economy, market conditions, and the value of stocks. Investors may be more likely to buy stocks or shift their portfolios toward riskier assets during non-election years, when there is less uncertainty about government policy. This could be due to a number of factors, including a stronger economy that leads investors to be more optimistic about future market conditions.

Government Debt and Deficits

Debt is a promise that one person or government makes to another person or government to repay a certain amount of money at a future date. Deficits occur when government spending is greater than government receipts, such as taxes. Elected official may use various political maneuvers to reduce debt or enact policies that increase revenues, such as raising taxes. Some investors may be more likely to sell government bonds if they are concerned about government debt and deficits. If government debt becomes too large, it may make it difficult for the government to pay back its loans. This could cause investors to worry that there may be future inflation as a result of increased government spending.

Economic Growth and Confidence

The economy is a complex system of production and exchange that affects a country’s financial markets. Investment decisions are often affected by economic indicators, such as gross domestic product (GDP), which measures growth in the economy. Investors may be more likely to buy stocks and shift their portfolios toward riskier assets based on economic indicators. The stock market is often driven by investor confidence. When the economy is growing, investors tend to be more optimistic and more willing to take risks with their money. This leads them to invest in stocks and other risky assets. When the economy is in a recession, investors may become pessimistic and willing to take fewer risks with their money. This leads them to shift their portfolios toward less risky assets.

Summary

The political climate is an important factor to consider when investing for the long term. The political climate can have an impact on financial markets through changes in investor sentiment and changes in government policy. When investors are more cautious, they are more likely to sell stocks and purchase government bonds. This can cause stocks to go down and government bond prices to go up. When investors are more optimistic, they are more likely to buy stocks and sell government bonds. This can cause stocks to go up and government bond prices to go down. Keep an eye on the political climate. It can change quickly, so it’s important to keep tabs on what is going on in Washington, D.C.

Aug 01

Is This a Normal Stock Market Correction?

By Mark Waggoner Investing, Stocks No Comments

Stock market correction? Inflation creates uncertainty.

The great author and journalist Damon Runyon wrote in 1929: “We’re probably all going to permanently forget about the stock market for about another 20 years or so.” As you may have guessed by now, he was right. That very same year, known as Black Monday, saw a massive drop in U.S. stock markets as well as globally. Nearly 90 years later and we find ourselves in an almost eerily similar situation. This time around it is not just tech stocks that are taking a hit but pretty much all major stocks have been feeling the heat. The Nasdaq has also fallen below its 200-day moving average for the first time in almost two years.

What is a Stock Market Correction?

A stock market correction is a 10% fall from a previous high. It’s normal for the stock market to go up and down, but a correction is when the stock market has a big, sudden drop. When investors get nervous about the economy or their stocks, they sell because they think the stocks are going to go down. This causes stocks to go down, which makes investors even more nervous, leading to more selling. A stock market correction happens when selling is on a large scale. A stock market crash is a bigger, sudden drop in the stock market. A crash happens when investors are extremely nervous and there’s a lot of selling feeding on itself. A market crash can cause major economic damage.

Why is a Stock Market Correction happening now?

Well, the recent drop and fall below key averages have brought back memories of the dot-com crash, or the bursting of the tech bubble back in 2000. However, the real culprit here appears to be the war between Russia and Ukraine, with the S&P falling almost 20%, including a huge drop in tech stocks. These dramatic falls come as the FED reduces liquidity, raises interest rates, and energy supplies come into question. We are purposely slowing economies around the world because of inflation. The problem is that we could be looking at the equivalent of giving chemotherapy to a patient. We hope the toxic concoction delivered will have the desired outcome, but many times complications arise. This may end up causing more pain for businesses and consumers worldwide.

Why should you care about a stock market correction?

The stock market is a representation of the state of the economy as a whole and, in this case, we find ourselves amid a correction. That is to say that while the market has had a rough patch, it does not look like it’s in the midst of a full-blown crash or the start of a major economic downturn. However, should the markets continue to fall and hit a new low for the year, this would be a sign that a larger correction could be in the works. What this means is that if you have investments in the stock market, and we hit new lows, you may have to reconsider investments. Another consideration is your age and can you afford the risk of an extended bear market.

The problem with corrections is that they are confusing

Market corrections are largely a result of investor psychology, which can be difficult to predict. When stock prices rise rapidly, investors may decide that the increase is unsustainable and that a correction is due. This can lead to a rush for the exit as investors attempt to sell their stocks before the correction hits. This can cause further drops in stock prices as the number of shares being traded falls. If a correction grows into a full-blown bear market, the momentum for a fall can become self-perpetuating. Investors who are afraid of losing money may rush to sell their stocks, which causes stock prices to fall even more.

Conclusion

We may once again see stocks soar in the months and years to come, but you can be certain that there will be corrections along the way. It is when these corrections hit, however, that we are reminded of the sheer volatility of the stock market as a whole. You can be sure that there is going to be an extended bear market, but you also have to be ready for it. There is no doubt that the stock market will continue to rise in the years to come. FEL-PM-220728