Life can be difficult for a financial market trader, particularly in the current economic climate. From Donald Trump's chaotic Presidency in the U.S. to the host of geopolitical conflicts unfolding across the globe, it is almost impossible for even the most deterministic of investors to remain focused on executing their strategies.
It is important to remember that the financial markets often gauge the pulse of the economy as a whole, however, meaning that investors who remain focused on the performance of their assets ultimately have the best of identifying long-term trends and making informed decisions.
What Are the Markets Really Telling Us About the Economy?
With this in mind, let's look at the current market symbols and attempt to determine precisely what they are telling us about the marketplace:
The Emergence of the Weak Dollar Will Empower Currency Traders
Despite it being argued that the protectionist Trump favoured a weaker dollar and more competitive exports, the greenback was the single biggest beneficiary in the wake of the property mogul's election.
This trend has reversed in recent times, however, with the dollar having experience losses against all other major currencies (including the ailing the pound). We should probably expect further losses too in the near-term, particularly once the distracted Trumpgets round to implementing his America first ethos in the form of a border adjustment tax and a significant drive to increase U.S. exports across the globe.
This is something for currency traders to bear in mind in the year ahead, as they look to diversify their portfolio and consider taking positions against the previously omnipotent dollar.
Gold Will Remain the Safe Haven of Choice Amid Global Unrest
At the beginning of 2017, it was predicted that gold would see significant losses as some order was restored to a sluggish global economy. Despite this, gold enjoyed a stellar performance during the first financial quarter, with the rally continuing into April against an increasingly uneasy global backdrop.
This is likely to continue too, particularly once the UK enter into negotiations with the EU to determine the precise terms of Brexit.
From an investor perspective, the sustained rise in the price of gold has firmly established the precious metal as a confirmed safe haven, highlighting the unstable nature of the economy in the process. This calls for a risk-averse approach, and one that respects the geopolitical conflicts that are unfolding throughout the world.
The Rise of Emerging Market Stocks Hints at Trouble Ahead for the U.S.
Some experts have countered the reported plight of the global economy by referencing the relatively robust performance of emerging market stocks and indexes. This must be considered in context, however, as while the rally in the emerging markets has been relatively impressive it actually tells us more about the state of developed economies.
More specifically, it informs us that while the climate outside of the U.S. may be bleak it has improved more noticeably than the American fiscal markets. Stocks provide the perfect example of this, and this is something that forward-thinking investors have been quick to capitalise on.
This is certainly a trend to watch, as such developments usually hint at a period of decline and potentially a longer-term recession.