July 13, 2020 at 10:45AM
Stock markets remain in the phase of the economic cycle, where the main driver is interest in “growth stories”. The total capitalization of FANGMAN stocks (Facebook, Amazon, Netflix, Google, Microsoft, Apple, Nvidia) exceeds $7.1 trillion. The capitalization of Tesla exceeds $285 billion, and the fortune of its founder, Elon Musk – $70.5 billion, making him the 7th richest man on the planet. These are all companies that are of interest to investors in times of rapid economic growth, and their particularly sharp growth often occurs at the end of this macrocycle phase.
The foreign exchange market is much more restrained. The leaders of growth against the dollar since the beginning of the year are Swiss franc, Swedish krone, and Japanese yen. However, their increase is not even 3%. There is a much longer list of those currencies that have been seriously affected since the beginning of the year. Among them the Brazilian real (-25%), South African rand (-16.5%), and Mexican peso (-15.6%).
For the most part, the current picture of the currency market correlates with the situation around the coronavirus. Countries that were not included in the hot spot lists, as well as those that managed to provide an organized exit from quarantine, enjoy interest from buyers.
However, the franc, yen, and euro may well strengthen against the dollar if the situation with COVID-19 in the U.S. remains alarming. In this case, the Fed and the U.S. government will continue to pump the economy with dollars, which will reduce their value.
In fact, at the expense of such a policy, the U.S. artificially creates a model of economic boom, when money is cheaper compared to the prospects of economic growth. Dollars printed by the Fed and distributed by the U.S. government are used to buy stocks, among which a number of high-profile names are chosen.
It should also be noted that the interest in stocks is accompanied by the strengthening of gold. Seemingly in an attempt to insure against the declining dollar value. Gold and a number of other similar instruments can not meet the demand of all those who want to save capital from the loss of purchasing power of the dollar.
This boom in the American high-tech market also has a secondary effect that is positive for Americans: products and services are becoming more competitive in the world market due to the weakness of the dollar, but companies have more and more capital to expand. This means that if the U.S. currency weakens, U.S. policymakers won’t worry about it for a long time, opening the door for potential depreciation not only against the franc and yen but also against the euro and several other currencies. As for the stock market, the current division is likely to remain in place. Some companies make an adequate assessment of markets based on prospects and multipliers, whereas the capitalization of others is getting higher and higher because of the extremely favorable attitude towards them from investors.
The FxPro Analyst Team
From: The FxPro Analyst Team https://fxpro.news/daily-forex-outlook/the-dual-nature-of-markets-in-2020-20200713/
Selected by fonecable.com
- NEWS: China July trade data, exports +10.4% y/y in yuan terms August 07, 2020 at 04:03AM
- NEWS: ForexLive Asia FX news wrap: Trump targeting WeChat, TikTok August 07, 2020 at 03:59AM
- NEWS: Japan fin min Asao says government finances facing a difficult situation August 07, 2020 at 03:47AM
- Dollar Up, But Gains Capped by U.S. Stimulus Package Stalemate
- NEWS: More from RBA’s Ellis – job support packages will make recovery a little stronger August 07, 2020 at 03:18AM
Top Posts & Pages
- NEWS: AUDUSD spikes to a new session high August 06, 2020 at 03:08PM
- NEWS: Here is what’s on the economic calendar in Asia today - Friday 7 August 2020 August 06, 2020 at 09:00PM
- NEWS: ForexLive Americas FX news wrap: AUD leads the way with sentiment upbeat ahead of NFP August 06, 2020 at 09:15PM
- Bitcoin pushed up by Wall Street greed
- NEWS: Amazon's Bezos sold $1.9 billion of his shares …. yours! August 06, 2020 at 12:56AM
- NEWS: Trade ideas thread - Friday 7 August 2020 August 06, 2020 at 09:54PM
- NEWS: European shares end the day lower. UK's FTSE falls -1.1%. August 06, 2020 at 04:44PM
- NEWS: Ohio governor DeWine tests positive for COVID-19 August 06, 2020 at 05:31PM
- NEWS: Goldman Sachs non - farm payroll preview (NFP) August 06, 2020 at 10:39PM
- NEWS: USDCHF moves toward MA targets (and other resistance targets). August 06, 2020 at 03:40PM