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Inflation

A capture of inflation, dilution and stimulus /2024As we see by the chart, we had a series of events mostly around mega-stimulus for Covid and a massive dilution of currency as triggering events. Inflation rose and is now back down close to the desirable 2% inflation. We don't want prices to go back to where they were, that is deflation and is not healthy for an economy. We want prices to stay near the same year after year with modest inflation. When inflation rises too fast, we increase interest rates to slow down spending, to reduce inflation. The best we can do is work on wage growth to accommodate the inflation from our past years while maintaining modest inflation. At 2.4% inflation currently, there really is pretty much nothing to fix anymore, we just need to keep it around where it is, a little lower really and work on modest wage growth. Looking at this data, it really looks like the vast majority of the culpability of that inflation we had came from 2020, one of the single worst years financially as a country with inflation starting to rise immediately in 2021, and exacerbated some in 2021. Looking at this chart, there is a tangible possibility that we see >10% inflation by 2027 Here is the M2 money supply chart:
ECONOMICS:USIRYYEducation
by EncryptShawn
Inflation's Impact on Stock ReturnsInflation's Impact on Stock Returns Inflation's pervasive influence on the financial landscape cannot be understated. It affects everything from everyday spending to large-scale investing. This FXOpen article dives into the intricate relationship between inflation and stock returns, unravelling the multifaceted dynamics at play. Join us as we dissect the mechanics of the impact of inflation on the stock market, offering clarity in a world of economic ebbs and flows. Understanding Inflation Inflation represents the rising prices of goods and services over time. While a moderate level of inflation is often viewed as a sign of a growing economy, high inflation can erode purchasing power, making everyday items more expensive for consumers. Those trading and investing during high inflation face challenges as it can diminish the real returns on investments. Stock Returns Defined Stock returns denote the gains or losses an investor realises from stock investments. These returns typically manifest in two ways: dividends and capital appreciation. Dividends are regular payments made by corporations to shareholders from their profits. Capital appreciation, on the other hand, refers to the increase in a stock's price over time. It's important to note that stock returns can also be negative if a stock's price decreases. Influencing these returns are a myriad of factors, including company performance, market sentiment, and broader economic conditions. Mechanisms: How Inflation Affects Stock Prices Inflation, with its overarching grip on the economy, wields a substantial influence on stock prices. Understanding this dynamic is vital for traders looking to navigate the stock market during inflation. Below, we'll delve into the various mechanisms through which inflation affects stocks. Cost of Goods Sold and Company Profitability When there's inflation, the costs of raw materials and production generally rise. This escalation can squeeze a company's profit margins unless they pass these increased costs onto the consumers. For some industries, hiking prices might result in decreased demand, further impacting profitability. Consequently, stock prices can see downward pressure as potential investors foresee lower earnings. Consumer Purchasing Power Inflation erodes the value of money, meaning consumers can buy less with the same amount of money as before. This diminished purchasing power can lead to reduced consumer spending. Companies, especially those in the retail and consumer goods sector, may witness a dip in revenue. As revenues play a crucial role in determining stock value, a decline can lead to lower stock prices. Central Bank Responses and Interest Rates Central banks often intervene to counteract high inflation, primarily by raising interest rates. When interest rates rise, borrowing becomes more expensive for companies, which can hinder expansion plans and reduce profitability. Additionally, when inflation and interest rates rise, alternative investments like bonds become more appealing than stocks, leading to reduced demand for stocks. By grasping these mechanisms, traders can better anticipate inflation's effect on stocks and devise strategies that account for the intricate relationship between inflation and the stock market. Inflation's Dual Impact: Sectors and Market Caps The impact of inflation isn't uniform across the board; it varies significantly between sectors and company sizes. Certain sectors, like commodities or energy, might benefit from rising prices, turning inflation into an advantage. Conversely, retail or consumer goods sectors might suffer as consumers' purchasing power diminishes, leading to decreased spending. When examining company sizes, the inflation rate and stock market dynamics reveal nuanced patterns. Large-cap companies, with their diversified operations and global reach, often have better tools to hedge against inflationary pressures. In contrast, small-cap stocks, which might be more regionally focused and have fewer resources, can be more vulnerable to the negative effects of high inflation. Historical Perspective: Inflation and Stock Market Performance Historical data provides traders with valuable insights into the dynamics between inflation and stock market performance. For instance, during the 1970s, the US experienced a period of stagflation—simultaneous high inflation and stagnant economic growth. This era saw the S&P 500 struggle to provide real returns, largely due to soaring oil prices and tight monetary policy. Another example can be traced to emerging markets like Argentina in the early 2000s. Faced with skyrocketing inflation rates, the stock market initially surged as locals shifted money into assets to retain value. However, long-term sustainability was challenged by economic instability and a lack of foreign investments. Mitigation: How Traders Can Prepare for Inflation Inflation can unsettle even the savviest traders, but with proper preparation, its challenges can be mitigated. When investing during inflation, diversifying assets becomes paramount. Spreading investments across different asset classes and instruments can act as a buffer against inflation's adverse effects. For instance, you can trade forex or commodity, cryptocurrency*, and ETF CFDs on FXOpen’s TickTrader platform and further equip yourselves with the real-time data and tools necessary to make effective decisions. Additionally, stocks of companies with strong pricing power, which can pass on increased costs to consumers, might fare better than others. Moreover, bonds, especially those with interest rates adjusting to inflation, can be among the best investments during inflation, offering a degree of protection to portfolios. The Bottom Line In understanding inflation's intricate relationship with stock returns, traders arm themselves with valuable insights. To navigate these economic complexities and optimise trading strategies, consider taking the next step: open an FXOpen account, a trusted broker that provides the tools and resources to thrive in ever-evolving financial markets. *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
NASDAQ:MSFTEducation
by FXOpen
2
US CPI Report Set to Influence Fed Decision and Market SentimentUS CPI Data Expected to Show Moderating Price Pressures Ahead of Fed Decision Key Highlights: Expected CPI Rise: The US Consumer Price Index (CPI) is forecast to rise by 3.4% year-over-year (YoY) in May, maintaining the same pace as in April. Core CPI Inflation: Annual core CPI inflation is anticipated to slightly decrease from 3.6% in April to 3.5% in May. Impact on US Dollar and Fed Rate Cut Expectations: The upcoming inflation data could influence the US Dollar value and market expectations regarding a September rate cut by the Federal Reserve (Fed). Detailed Analysis: Upcoming CPI Data Release: The Bureau of Labor Statistics (BLS) is set to publish the highly anticipated Consumer Price Index (CPI) inflation data for May on Wednesday at 12:30 GMT. This report is expected to bring intense volatility to the US Dollar, as any surprises in the inflation figures could significantly impact market expectations for the Federal Reserve's rate cut decisions in September. Inflation Expectations: Overall CPI: Expected to rise by 3.4% YoY in May, consistent with April’s rate. Core CPI: Forecast to inch down to 3.5% YoY from 3.6% in April. Month-over-Month (MoM) Changes: The CPI is anticipated to increase by 0.1% in May, down from a 0.3% rise in April. Core CPI is likely to hold steady at a 0.3% MoM increase. Federal Reserve’s Stance: In a recent moderated discussion, Federal Reserve Chairman Jerome Powell adopted a dovish stance, expressing lower confidence in inflation moving back down and suggesting it is unlikely that the next move would be a rate hike. Powell's comments came just before the April CPI data release, which showed softened headline and core inflation. Labor Market Impact: A strong US labor market report, showing a substantial increase in Nonfarm Payrolls and higher-than-expected Average Hourly Earnings, has tempered market expectations for a September rate cut. Despite earlier optimism for rate cuts, the robust labor data has led markets to reassess the likelihood of such cuts. Banks' Expectations for CPI: Goldman Sachs: Predicts CPI to be at 3.3% year-over-year, slightly lower than the previous month. JP Morgan: Expects CPI to remain stable at 3.4%, indicating no significant change. Morgan Stanley: Anticipates a slight decline to 3.2%, reflecting easing inflation pressures. Bank of America: Foresees CPI at 3.3%, aligning with a gradual slowdown in inflation. Analysts’ Forecasts: According to TD Securities analysts, core inflation is expected to slow to a "soft" 0.3% MoM in May, with the headline likely rising by a softer 0.1% due to a significant decline in energy prices. They also noted a potential for a dovish surprise with an unrounded core CPI forecast of 0.26% MoM. Conclusion: The upcoming US CPI data release is crucial, with potentially significant impacts on the US Dollar and market expectations for Federal Reserve rate cuts. A CPI reading in line with expectations could reinforce current market positions, while any deviation could trigger substantial market volatility. This comprehensive analysis outlines the expectations and potential impacts of the upcoming CPI data, providing valuable insights for market participants.
OANDA:XAUUSDEducation
by SroshMayi
How will Stocks React to Inflation?The stock market's reaction to an inflation trend always involves a delay. Based on studies of the inflation trend, this delay is approximately 6 months. How about the inflation data month by month? Micro E-Mini Nasdaq Ticker: MNQ Minimum fluctuation: 0.25 index points = $0.50 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME_MINI:NQ1!Education
by konhow
2
Here's what Wall Street economists expects this week.Federal Reserve Chair Jerome Powell emphasized the need for continued patience in monitoring inflation trends during his remarks at the Foreign Bankers’ Association's annual meeting in Amsterdam on Tuesday. Powell highlighted that while there was some easing of inflation in the U.S. last year, the first quarter showed unexpectedly high inflation rates, which were not anticipated. Despite these challenges, he maintains a cautious optimism that inflation will gradually return to the Fed's target of 2% over the year, though he admitted his confidence has diminished somewhat following the recent data. Powell concluded by stating that the central bank will closely observe incoming inflation data to determine its future monetary policy actions. This week will see an increase in activity with the upcoming release of the U.S. April consumer price index on Wednesday, which is closely watched by economists focusing on potential changes in Federal Reserve policies, particularly the possibility of interest rate cuts before the end of the year. Recent data has shown a disruption in the declining inflation trend from the first quarter, sparking concerns about persistently higher inflation rates and reduced likelihood of monetary easing, according to Sam Bullard, a senior economist at Wells Fargo. In response to these concerns, Fed Chair Jerome Powell has indicated two scenarios that could lead to rate cuts: a reassurance of low inflation rates or a sudden downturn in the labor market. Key events this week include: Consumer Price Index (CPI) for April: Scheduled for release at 8:30 a.m. Eastern on Wednesday. Economists anticipate that the headline CPI inflation will increase by 0.4% for the third consecutive month, with the year-over-year rate possibly moderating to 3.4%, slightly down from 3.5% the previous month. The core CPI, which excludes volatile items like food and energy, might rise by 0.3%, marking the lowest rate since December, with an annual pace expected to decline to 3.6%, a three-year low. Retail Sales for April: Also set for Wednesday at 8:30 a.m. Eastern, where retail sales are expected to show a modest increase of 0.5%, following a strong 0.7% rise in March. Sales excluding autos might increase by just 0.2%, compared to a 1.1% increase the previous month. Adjustments to March's figures could be made, potentially affecting the April growth figures. Weekly Jobless Claims: On Thursday at 8:30 a.m. Eastern, jobless claims are anticipated to decrease by 12,000, offsetting more than half of the previous week's unexpected rise to 231,000, influenced by seasonal employment shifts in New York. Overall, while inflation has shown signs of heating up unexpectedly in the first quarter, economists still forecast a downward trend for the year. The Philadelphia Fed's latest survey suggests that by the fourth quarter, headline inflation could slow to 2.5% annually, with core inflation at 2.7%.
OANDA:SPX500USDEducation
by SroshMayi
How does inflation affect the stock market?The world’s financial environment has become incredibly tangled and multifaceted. The global availability of information to investors, particularly in rural areas, thanks to the internet, has caused investor sentiment to shift from an emotional response to an analysis and data-driven one. Inflation serves as a prime example of this. In the past, most individuals viewed inflation as an indication of an unhealthy economy. However, in the present day, investors have become more knowledgeable about economic cycles and are capable of making sound investment decisions at each stage of a country’s economy. Therefore, today, we will discuss inflation in general and evaluate its influence on the stock markets in India. Let’s start with a topic on How does inflation affect the stock market. What is Inflation? In simple words, inflation refers to the gradual increase in the prices of goods and services. As the inflation rate rises, so does the cost of living, resulting in a decrease in purchasing power. As an example, suppose bananas were priced at Rs.100 per kilo in 2010. In an inflationary economy, the cost of bananas would have increased by 2020. Let’s assume that the price of a Banana is now Rs.200 per kilo in 2020. Thus, in 2010, with Rs.1000, you could buy 10kg of Banana. However, in 2020, due to the decrease in purchasing power caused by inflation, you would only be able to buy 5kg of Bananas for the same amount. To understand inflation in detail, let’s have a look at what is the reason behind inflation. So, there are two major factors behind an increase in the rate of inflation in the economy. 1) Demand > Supply One reason for an increase in the inflation rate is when the average income of individuals in an economy rises, and they want to purchase more goods and services. During such times, the demand for these products and services can exceed their supply, resulting in a scarcity of these goods and services. Consequently, buyers are willing to pay more for them, which leads to a general increase in prices. 2) Increase in the cost of production Another reason for an increase in the inflation rate is when the cost of production of goods and services increases due to an increase in the costs of raw materials, labour, taxes, etc. While this leads to an increase in the cost of production, it also causes a decrease in the supply of these goods and services. With the demand remaining constant, the prices tend to increase. Inflation and the Indian Stock Markets: The price of a share in the stock markets is determined by the interplay of demand and supply, which is influenced by a variety of factors, including social, political, economic, cultural, and so on. Anything that affects investors can have an impact on the demand and supply of stocks, and inflation is no exception. Here is a brief overview of the impact of inflation on stock markets: 1. The Purchasing Power of Investors Inflation, by definition, is a rise in the prices of goods and services, and it is also an indicator of the diminishing value of money. Therefore, if the inflation rate is 5%, then Rs.10, 000 today will be worth Rs.9, 500 after one year. If the inflation rate increases to 10%, then the same amount will be worth even less in the future. So, as the inflation rate increases, the purchasing power of investors decreases. This decrease in purchasing power can directly impact the stock market since investors would be able to purchase fewer stocks for the same amount. 2. Interest Rates When the inflation rate rises, the Reserve Bank of India ( RBI ) often increases interest rates for deposits and loans. This move is intended to encourage people to save money and limit excess liquidity, thereby reducing the inflation rate. However, as loans become more expensive, the cost of capital for companies also increases. Consequently, the projected cash flows of companies are valued lower, which can lead to lower equity valuations. 3. Impact on Stocks As the increase in the inflation rate, speculation about the future prices of goods and services can create a highly volatile market environment. Since prices are rising, many investors may speculate that companies will experience a drop in profitability. As a result, some investors might decide to sell their shares, leading to a drop in their market price. However, other investors who remain optimistic about the company’s future profitability may continue to buy these stocks, which can create a volatile environment in the stock market. Value stocks tend to perform well during times of inflation because they are often more established companies with stable earnings and a history of paying dividends, making them more attractive to investors seeking steady returns. In contrast, growth stocks are often newer companies with higher potential for future earnings, but they may not have established cash flows to support their valuations. When inflation rises, investors may become more risk-averse and prioritize stable, predictable returns over potential growth, leading to a decline in demand for growth stocks and a corresponding drop in their market prices. 4. Long-term benefits of increasing inflation rates on stock markets A certain level of inflation is required for an economy to grow, as it encourages spending and investment. A moderate and controlled rise in inflation rates can lead to an increase in the income of the people and help in boosting the economy. However, if the inflation rate goes beyond a certain limit, it can have a negative impact on the economy. Therefore, it is crucial to maintain a balance between inflation and economic growth. Conclusion: Investors should analyse the trend of inflation rates in recent years before making any investment decisions. Sudden spikes in inflation rates may cause uncertainty and volatility in the stock markets, while a gradual and steady rise in inflation rates can provide a conducive environment for businesses to grow and expand, leading to higher stock valuations. Additionally, investors should consider investing in sectors that perform well in an inflationary environment, such as energy, commodities, and real estate. ___________________________ 💻📞☎️ always do your research. 💌📫📃 If you have any questions, you can write me in the comments below, and I will answer them. 📊📌❤️And please don't forget to support this idea with your likes and comment
NSE:TCSEducation
by khushaljain023
As Inflation Retreats, How Will Equities Perform in 2024?During the 1990s and again in the 2010s, equity and bond investors celebrated a goldilocks economy. GDP and employment growth were solid and core inflation remained comfortably around 2% per year despite increasingly tight labor markets. That scenario was occasionally interrupted, notably by the tech wreck recession in 2001, the 2008 global financial crisis, and most recently by the pandemic-era surge in inflation. But by late 2023, inflation appeared to be coming down globally. Comparing the annualized inflation rates during the six months from December 2022 to May 2023, and the six months from June to November 2023, inflation rates have fallen sharply in every major economy (Figure 1). Figure 1: Core inflation rates are falling rapidly worldwide Source: Bloomberg Professional (CPI XYOY, CACPTYOY, UKHCA9IC, CPIEXEMUY, JPCNEFEY, ACPMXVLY, NOCPULLY, CPEXSEYY, SZEXIYOY, NZCPIYOY) Granted, things still don’t feel great for consumers, who appear to be less sensitive to the rate of change in prices than they are to level of prices which remain high and are still climbing, albeit at a slower pace than before. Nevertheless, it appears that the main drivers of inflation -- supply chain disruptions (Figure 2) and surging government spending (Figure 3) -- subsided long ago. Supply chain disruptions sent the prices of manufactured goods soaring beginning in late 2020. Depressed pandemic-era services prices initially masked the surge in inflation, but services prices began soaring as the world reopened in 2021 and 2022 driven by surging government spending, which created new demand but no new supply of goods and services. Since then, however, supply chain disruptions have faded despite Russia’s invasion of Ukraine, and with little impact thus far from the conflict between Israel and Hamas. Moreover, government spending has rapidly contracted as pandemic-era support programs have expired despite some increases in spending related to infrastructure and the military. As such, not even the low levels of unemployment prevailing in Europe, U.S. and elsewhere appear to be sustaining the rates of inflation witnessed in 2021 and 2022. Figure 2: Supply chain disruptions drove inflation in manufactured goods in 2020 and 2021. Source: Bloomberg Professional (WCIDLASH and WDCISHLA) Figure 3: U.S. government spending has fallen from 35% to 22.6% of GDP Source: Bloomberg Professional (FFSTCORP, FFSTIND, FFSTEMPL, FFSTEXC, FFSTEST, FFSTCUST, FFSTOTHR, GDP CUR$, FDSSD), CME Group Economic Research Calculations U.S. core CPI is still running at 4% year on year but its annualized pace slowed to 2.9%. What’s more is that in the U.S. most of the increase in CPI has come from one component: owners’ equivalent rent, which imputes a rent that homeowners theoretically pay themselves based off actual rents on nearby properties. Outside of owners’ equivalent rent, inflation in the U.S. is back to 2%, its pre-pandemic norm (Figure 4). Figure 4: U.S. inflation is much lower when excluding home rental Source: Bureau of Labor Statistics, Bloomberg Professional (CPI YoY and CPI XYOY) Moreover, inflation in China has been running close to zero in recent months and has sometimes even shown year-on-year declines. In China, real estate grew to be as much as 28% of GDP, and the sector is now rapidly contracting. China’s year-on-year pace of growth for 2023 looks solid at around 5%, but that’s not too impressive given than the year-on-year growth rate compares to 2022, when the country spent much of the year in COVID lockdowns. By the end of 2023, China’s manufacturing and services sectors were both in a mild contraction, according to the country’s purchasing manager index data. If growth doesn’t improve in 2024, China may export deflationary pressures to the rest of the world. That doesn’t mean that the are no upward risks to prices. If the Israel-Hamas war broadens and interrupts oil supplies through the Suez Canal, that could reignite inflation. Moreover, green infrastructure spending, rising military spending, near-shoring as well as demographic trends in places like South Korea, Japan, China and Europe that limit the number of new entrants in the global labor market could potentially keep upward pressure on inflation. For the moment, however, any inflationary impacts from geopolitical or demographic factors appear to be overwhelmed by the usual set of factors keeping inflation contained including technological advancement and large labor cost differentials among nations. So, what does this mean for investors? As we begin 2024, fixed income investors are pricing about 200 basis points (bps) of rate cuts by the Federal Reserve over the next 24 months, and the S&P 500 is trading close to a record high. Be warned, however, interest rate expectations have been extremely volatile over the past 12 months, oscillating between expecting rate hikes to rate cuts by as many as 200 bps or more (Figure 5). If we continue to see strong employment and consumer spending numbers combined with weakening inflation numbers, this may keep rate expectations caught in a volatile crosscurrent. Figure 5: Investors price steep Fed cuts but rate expectations are extremely volatile Source: Bloomberg Professional (FDTRMID, FFZ15...FFZ25), CME Economic Research Calculations Moreover, while equities did well in 2023, their rally was narrow, driven by only a handful of large tech and consumer discretionary stocks, while most other stocks including small caps were largely left behind. Finally, the stock market itself isn’t cheap. The S&P 500 is trading at 23.37x earnings and the Nasdaq 100 at 59x earnings. As a percentage of GDP, the S&P 500’s market is still close to historic highs. Finally, even with 2023’s rally, the indexes are trading at basically the same levels at which they ended 2021 (Figure 6). Part of the reason stocks did so well in the 1990s and 2010s is that they started out those decades cheap. The same cannot be said of the starting values for 2024 (Figure 7). Figure 6: Nasdaq and S&P 500 are near end of 2021 levels but the Russell 2000 lags behind Source: Bloomberg Professional (SPX, NDX and RTY) Figure 7: Going into 2024, equities aren’t cheap like they were in 1994 or 2014 Source: Bloomberg Professional (SPX, GDP CUR$, USGG10YR). If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CME_MINI:ES1!Education
by CME_Group
Real Interest Rate: How It Affects the Economy and Forex MarketReal interest rate is the interest rate adjusted for inflation. Nominal interest rate is the reported rate, while real interest rate is the actual rate that the borrower receives after accounting for inflation. The formula for calculating real interest rate is as follows: Real interest rate = Nominal interest rate - Inflation rate For example, if the nominal interest rate is 5% and the inflation rate is 3%, then the real interest rate is 2%. Real interest rate plays an important role in the economy. High real interest rates can encourage investment and economic growth. Conversely, low real interest rates can dampen investment and economic growth. Real interest rate has a significant impact on the forex market. An increase in the real interest rate will make the domestic currency more attractive to foreign investors. This is because foreign investors can earn higher returns from their investments in countries with high real interest rates. An increase in the real interest rate will cause the domestic currency to appreciate against foreign currencies. This is because foreign investors will increase demand for the domestic currency to invest. A decrease in the real interest rate will cause the domestic currency to depreciate against foreign currencies. This is because foreign investors will reduce demand for the domestic currency to invest. Here are some examples of the impact of real interest rates on the forex market: In 2022, the US Federal Reserve (The Fed) raised the real interest rate. This caused the US dollar to appreciate against other currencies. DXY USDJPY USDDKK USDCNH In 2022, the European Central Bank (ECB) lowered the real interest rate. This caused the euro to depreciate against other currencies. EURCAD EURCHF EURSEK Governments and central banks can use the real interest rate as one of the instruments of monetary policy to influence the exchange rate of the currency. For example, if the government wants to increase the exchange rate of the domestic currency, the government can raise the real interest rate. Real interest rate can be used to predict the movements of currency pairs. Currency pairs with higher real interest rates tend to appreciate against currency pairs with lower real interest rates. Here are the steps for using real interest rate to predict the movements of currency pairs: Collect data on real interest rates from the two countries whose currencies form the currency pair. Compare the real interest rates of the two countries. If the real interest rate of country A is higher than the real interest rate of country B, then the currency pair A/B will tend to appreciate. For example, the real interest rate of the United States is 1.8%, while the real interest rate of Japan is -3.1%. Therefore, the currency pair US dollar/Japanese yen (USD/JPY) will tend to appreciate by 4.9%. Real interest rate is only one factor that affects the movements of currency pairs. Other factors that should also be considered include economic and political factors that can affect the demand and supply of the two currencies.
Education
by DNP-FX
World Wars & US Inflation From 1914This is the US Inflation Rate (YoY) from 1914 until 2022. Symbol is called USIRYY and it measures the Inflation Volatility in the United States. With the War going on in Ukraine, and Russia trying to force its way through, I took the liberty of looking into the following: - How Global Wars Affect Inflation - How US Inflation Reacts to External Wars - How Wars Affect the Financial Markets You can see the time-lines, it's all laid-out in the chart (graph). I took all the Major World Wars and events that significantly affected, not only the US Inflation, but Inflation itself. First of all, the US Inflation Rate (USIRYY) tells me the following: * When the US was involved in a War, we can notice that the US Inflation spiked. * Most of the times when US was not involved in an External War, then Inflation dropped. That's because of War & Uncertainty Sentiment around this "terrific" word. War does not bring anything good, in fact, in only brings bad times. People die and global sentiment gets super-negative. This of course, leads to... you guessed it: Market Crash. Why? Because after or during times of War, there are Recessions and Depressions. Supply Chains are disrupted and the Global Economy falls on its face. What about looking at things from a Technical Analysis perspective? * Symmetrical Triangle: and the only way is UP! I will give you points which I believe are worth keeping in mind for the next Market Crash. First of all, let's be logical about this. Winter is coming and it's only gonna get worse before it gets better. As Inflation spiked to a 40y high, the higher powers intervened, in an attempt to cool the Inflation spike off. I'm talking here about the Federal Reserve (FED) ramping up the Interest Rates. This is the Effective Federal Funds Rate (FEDFUNDS). Can you see the break-out? They want to calm down Inflation, but they can't. Why? Because this is no ordinary Inflationary period, it's a long-lasting thing. One of those hyperinflation, deflation, stagflation, or whatever the heck these experts call it... :) The Volatility Index (VIX) tells me that another spike in Fear Sentiment is inevitable. I'm in love with Elliott Wave Analysis, so I labeled this next chart. This is the United States Consumer Confidence Index (USCCI) and it measures exactly what its name says, LOL. When it drops, people are freaking out. When it rises, people are optimistic and the Markets are going up. Daaaa! With all that said, what's the bottom line here? I believe that periods of terror are gonna hit us all. Are we having World War 3? Who the heck knows? All I know is that there are more pieces to this puzzle: United States 10Y Bonds (USB10YUSD) have reached the Support, and a spike bigger than the Covid Pandemic has started: The 10Y Treasury Note Yield (TNX) have broken out of a 40y down-trend: Isn't it ironic how it synced with the Inflation 40y high? Damn! Germany 40 (DAX, GER30, GRXEUR) is doomed. Fractal sequence, Descending Channel, and a "beautiful" ABC Elliott Wave Pattern. So, how can you prosper from all this? Metals could be a good hedge. Gold (XAUUSD) just broke out of an important Bearish Structure. Maybe it will go up. Natural Gas (NG1!) & Crude Oil (USOIL) however, are showing Bearish Reversals. Bitcoin (BTCUSD) is Bearish until further notice as well. But this may become the new currency moving forward. In times of terror, the banking systems might need to change. Cash and Card is so '00. WHAT'S YOUR TAKE? WAR OR PEACE? Leave your commend down below. Cheers! Richard
ECONOMICS:USIRYYEducation
by Lionheart-EWA
5
Understanding Interest-rates & InflationHey Traders So, I have been asked by many of my clients to explain the relationship between interest-rates and inflation and how to translate that information into their analysis. For this reason I put this little mini lesson together to explain: - The core role of the central bank - Reason and objectives for interest-rates and inflation - How you can use this information to enhance your analysis - How to take advantage of this info when taking, managing or closing your trades. PS. if you would like me to do more of these types of videos be sure to leave a comment in the comment section.
TVC:DXYEducation
by DeanMuller
Inflation Wears Out Its Welcome in JapanHas anybody ever told you to be careful what you wish for because you might get it? Well, the Bank of Japan appears to be in one of those situations today. Japan spent three decades oscillating into and out of deflation. As such, when inflation started to rise in 2022, the BOJ was initially thrilled. Finally deflation was coming to an end, and inflation was heading up to a target of 2.5%. The problem is that inflation didn’t stop heading higher at 2.5%. It’s now up to 4.2% excluding fresh food and energy. In a nation with a large elderly population where many people are on fixed incomes, having inflation too high is just as bad has having it too low. But why should the rest of the world care what happens to Japan’s inflation rate? For starters, Japan has the world’s fourth largest economy, and what happens to the yen and to Japanese bond yields is of worldwide consequence. Beginning in 2012, the BoJ launched a mega quantitative easing program – four times bigger than what the Federal Reserve did relative to the respective size of their economy. This QE program sent the yen plunging as the BoJ also capped 10-year Japanese government bond yields. But recently, they have softened the cap, sending not only Japanese bond yields higher but raising the cost of long-term borrowings all around the world, including in the United States and Europe. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
TVC:JP10YEducation
by CME_Group
U.S. Economy Less Interest Rate SensitiveDespite the fastest rise in interest rates since 1981, and an inverted yield curve where short-term rates are much higher than long-term bond yields, the United States has not (at least yet) experienced the recession forecast by the vast majority of market pundits and economists. Why not? The relatively few contrarians that did not forecast a recession, including myself, had many reasons for a more optimistic view. However, the most critical reason appears to have been an appreciation of how the U.S. economy has changed over decades and become much less sensitive to interest rates. In the 1950s, 1960s and 1970s, the U.S. economy was driven by housing and manufacturing. The only choice to finance a home was the 30-year fixed rate mortgage, provided by a savings and loan institution, that deliberately borrowed short-term from savers and lent long-term, taking considerable interest rate and yield curve risk. Further, there was no such thing as financial futures or interest rate swaps to allow for the efficient hedging of interest rate risk. Fast forward to the modern economy of the 2020s. The U.S. is an economy driven by the service sector, and services are considerably less sensitive to interest rate swings than housing and automobiles. Home mortgages come in every size and flavor, from floating rates to fixed rates. Mortgages are originated by specialists and then packaged and sold to pensions, endowments and investors willing to take the risk. There are no savings and loan institutions. Financial futures, swaps and options are available for efficient hedging and management of interest rate risk. In short, the U.S. economy does not dance to interest rates like it once did. Make no mistake, though; interest rate shifts have a profound impact on asset values, from equities to bonds, to housing. It is just that the impact on the real economy is much more subdued than it once was, and a rise in rates does not automatically mean a recession is around the corner. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZN1!Education
by CME_Group
EUR, GBP Rebound Against Dollar as Inflation Trends DivergeEuropean currencies have been rebounding strongly versus the U.S. dollar since hitting bottom in late September 2022 during the Gilt crisis when yields on U.K. government bonds surged. The rally in European currencies accelerated in July 2023 following the release of the U.S. inflation statistics (Figure 1). Figure 1: EUR and GBP have rebounded strongly in recent weeks and months Recent U.S. and European inflation data are highly divergent. U.K. core inflation has climbed to above 7%. Eurozone core inflation has risen towards 5.4% while the U.S. core consumer price index (CPI) has been falling towards 4.8%, down from a peak of 6.6% last year. What’s even more remarkable is that the divergence between U.S. and European inflation rates is much stronger when one measures it in a consistent fashion. The U.K. and European Union (EU) use a “harmonized” measure that is consistent across Europe. The harmonized measure includes rents of actual rental properties but, unlike the standard U.S. numbers, does not assume that homeowners rent properties from themselves. Excluding the so-called owners’ equivalent rent (OER) from the U.S. numbers makes a huge difference. At the moment, the assumption that homeowners rent properties from themselves has exaggerated U.S. core inflation to the tune of 2.5%. The U.S. Bureau of Labor Statistics produces what they term an “experimental” harmonized measure of core-CPI that gauges inflation the same way as in Europe and therefore excludes the OER component. This shows core inflation in the U.S. to be 2.3%, far below European levels and trending lower rather than higher (Figure 2). Figure 2: Measured consistently, U.S. core inflation is half to one-third European levels This suggests that the U.S. Federal Reserve (Fed), which appears to be preparing a 25-basis-point (bps) rate hike on July 26, could soon have its policy rate at more than 3% above the level of harmonized core inflation (Figure 3). Meanwhile, the Bank of England (BoE), which just raised rates to 5%, still has rates more than 2% below its rate of harmonized core inflation (Figure 4). The European Central Bank (ECB) has its main refinancing rate at 4%, 1.4% below the level of the eurozone’s harmonized core inflation (Figure 5). Figure 3: Fed Funds now exceed harmonized U.S. Core CPI by 3%, the most since 2007 Figure 4: The BoE’s policy rate is still 2% below inflation Figure 5: The ECB has its policy rate 1.4% below Eurozone core inflation The differences in the level of real rates (policy rates minus harmonized core inflation) suggests that the Fed may have overtightened policy and may need to reduce rates sooner than expected by market participants. By contrast, those same measures suggest that the European central banks may still be behind their inflation curve and may need to tighten policy even more substantially. Indeed, forward curves have moved significantly in the direction of this thinking in recent weeks and now price just 25 bps more in rate hikes for the Fed compared to 75 bps for the eurozone and 125-150 bps in the U.K. Elsewhere, the U.S. yield curve is much more sharply inverted than yield curves in the eurozone or the U.K. This may also lead currency traders to look past the Fed’s last expected rate hike and towards possible rate cuts if monetary overtightening produces a downturn in the U.S. sooner than it does in Europe. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Education
by CME_Group
The Silent Killer: Understanding Inflation's Impact Inflation is an economic phenomenon that gradually erodes the purchasing power of money over time. While it may seem like a minor inconvenience, inflation can have detrimental effects on individual savings , investment returns, and overall economic stability. In this article, we will explore why inflation can be considered a silent killer and delve into the reasons behind the growing interest in Bitcoin as a potential defense against its effects. 1. The Hidden Damages of Inflation: 1.1 Reduced purchasing power 1.2 Diminished savings value 1.3 Income distribution imbalances 2. The Role of Central Banks and Government Policies: 2.1 Monetary policies: Central banks use various tools, such as adjusting interest rates and printing more money, to manage inflation. However, these measures can sometimes have unintended consequences. 2.2 Fiscal policies: Government spending, tax policies, and borrowing influence inflation rates by impacting the money supply and aggregate demand within an economy. 3. The Case for Bitcoin as a Hedge against Inflation: 3.1 Scarce supply: Bitcoin is a decentralized digital currency with a limited supply of 21 million coins. Unlike fiat currencies, no central authority can arbitrarily decide to print more bitcoins, reducing the potential for inflationary pressures. 3.2 Store of value: Bitcoin's limited supply and increasing demand make it an attractive store of value, especially in a world where traditional fiat currencies are prone to inflation. 3.3 Global accessibility: Bitcoin transcends geographical boundaries, enabling individuals to protect their wealth and access financial services without relying on traditional banking systems that can be influenced by inflationary pressures. 3.4 Economic uncertainty: In times of economic distress or high inflation, Bitcoin offers a potential safe haven for investors seeking to preserve the value of their wealth independently of traditional financial systems. 4. Considerations and Risks: 4.1 Volatility 4.2 Regulatory challenges 4.3 Technological barriers Inflation can silently erode the value of money, impacting savings, investments, and overall economic stability. While many traditional assets struggle to mitigate inflation risks effectively, Bitcoin can potentially serve as a hedge against inflation due to its decentralized nature, limited supply, and growing global acceptance. However, investors should carefully consider the risks and challenges associated with cryptocurrencies before making investment decisions. What do you want to learn in the next post?
COINBASE:BTCUSDEducation
by UnitedSignals
6
Deciphering Divergent Signals The Complex Economic LandscapeThe global economy continues to face profound uncertainties in the wake of COVID-19's massive disruptions. For policymakers and business leaders, making sense of divergent signals on jobs, inflation, and growth remains imperative yet challenging. In the United States, inflation pressures appear to be moderately easing after surging to 40-year highs in 2022. The annual Consumer Price Index (CPI) declined to 3% in June from the prior peak of 9.1%. Plunging gasoline and used car prices provided some consumer relief, while housing and food costs remained worryingly elevated. Core CPI, excluding food and energy, dipped to 4.8% but persists well above the Fed’s 2% target. Supply chain improvements, waning pandemic demand spikes, and the strong dollar making imports cheaper all helped cool inflation. However, risks abound that high prices become entrenched with tight labor markets still buoying wages. Major central banks responded with substantial interest rate hikes to reduce demand, but the full economic drag likely remains unseen. Further supply shocks from geopolitics or weather could also reignite commodity inflation. While the direction seems promising, the Fed vows ongoing vigilance and further tightening until inflation durably falls to acceptable levels. The path back to price stability will be bumpy. Yet even amidst surging inflation, the US labor market showed resilience through 2022. Employers added over 4 million jobs, driving unemployment down to 3.5%, matching pre-pandemic lows. This simultaneous inflation and job growth confounds historical norms where Fed tightening swiftly slows hiring. Pandemic-era stimulus and savings initially cushioned households from rate hikes, sustaining consumer demand. Early retirements, long COVID disabilities, caregiving needs, and possibly a cultural rethinking of work also constricted labor supply. With fewer jobseekers available, businesses retained and attracted talent by lifting pay, leading to nominal wage growth even outpacing inflation for some months. However, the labor market's anomalous buoyancy shows growing fragility. Job openings plunged over 20% since March, tech and housing layoffs multiplied, and wage growth decelerated – all signals of softening demand as higher rates bite. Most economists expect outright job losses in coming months as the Fed induces a deliberate recession to conquer inflation. Outside the US, other economies show similar labor market resilience assisted by generous pandemic supports. But with emergency stimulus now depleted, Europe especially looks vulnerable. Energy and food inflation strain household budgets as rising rates threaten economies already flirting with recession. Surveys show consumer confidence nosediving across European markets. With less policy space, job losses may mount faster overseas if slowdowns worsen. Meanwhile, Mexico’s economy and currency proved surprisingly robust. Peso strength reflects Mexico’s expanding manufacturing exports, especially autos, amid US attempts to nearshore production and diversify from China reliance. Remittances from Mexican immigrants also reached new highs, supporting domestic demand. However, complex immigration issues continue challenging US-Mexico ties. The pandemic undoubtedly accelerated pre-existing workforce transformations. Millions older employees permanently retired. Younger cohorts increasingly spurn traditional career ladders, cobbling together gig work and passion projects. Remote technology facilitated this cultural shift toward customized careers and lifestyle priorities. Many posit these preferences will now permanently reshape labor markets. Employers clinging to old norms of in-office inflexibility may struggle to hire and retain talent, especially younger workers. Tighter immigration restrictions also constrain domestic labor supply. At the same time, automation and artificial intelligence will transform productivity and skills demands. In this context, labor shortages could linger regardless of economic cycles. If realized, productivity enhancements from technology could support growth with fewer workers. But displacement risks require better policies around skills retraining, portable benefits, and income supports. Individuals must continually gain new capabilities to stay relevant. The days of lifelong stable employer relationships appear gone. For policymakers, balancing inflation control and labor health presents acute challenges. Achieving a soft landing that curtails price spikes without triggering mass unemployment hardly looks guaranteed. The Fed’s rapid tightening applies tremendous pressure to an economy still experiencing profound demographic, technological, and cultural realignments. With less room for stimulus, other central banks face even more daunting dilemmas. Premature efforts to rein in inflation could induce deep recessions and lasting scars. But failure to act also risks runaway prices that erode living standards and stability. There are no easy solutions with both scenarios carrying grave consequences. For business leaders, adjusting to emerging realities in workforce priorities and automation capabilities remains imperative. Companies that embrace flexible work options, prioritize pay equity, and intelligently integrate technologies will gain a competitive edge in accessing skills and talent. But transitions will inevitably be turbulent. On the whole, the global economy's trajectory looks cloudy. While the inflation fever appears to be modestly breaking, risks of resurgence remain as long as labor markets show tightness. But just as rising prices moderate, the delayed impacts from massive rate hikes threaten to extinguish job growth and demand. For workers, maintaining adaptability and skills development is mandatory to navigate gathering storms. Any Coming downturn may well play out differently than past recessions due to demographic shifts, cultural evolution, and automation. But with debt levels still stretched thin across sectors, the turbulence could yet prove intense. The path forward promises to be volatile and uneven amidst the lingering pandemic aftershocks. Navigating uncertainty remains imperative but challenging.
TVC:US10YEducation
by BitcoinMacro
5
Inflation vs Innovation Can the Markets Handle the HeatGlobal markets face contradictory forces in 2023. Inflation still simmers as central banks tighten money supply worldwide. Geopolitical friction continues while economic growth likely slows ahead. Yet technological transformation charges ahead, with artificial intelligence poised for explosive improvements. Investors and policymakers must stay nimble in this uncertain environment. After plunging painfully in 2022, stocks have rebounded with vigor so far this year. This despite raging inflation and the Federal Reserve's hawkish stance on interest rates. Hefty liquidity efforts in China likely buoyed prices. Investors may also have grown too pessimistic amid still-sturdy corporate profits. But sentiment could sour again if supply chain snarls resurface. In bond markets, yields continue reflecting dreary growth expectations after last year's surge. The inverted yield curve especially screams pessimism on the near-term economy. Meanwhile, the Fed's bond portfolio shrinkage has yet to rattle markets. This implies the Fed's quantitative easing and tightening have limited impact on actual money supply, defying popular perception. On inflation, early 2023 figures show it easing from 40-year heights but still well above the Fed's 2% bullseye. The Fed remains leery of declaring victory prematurely. Taming inflation sans triggering severe recession is an epic challenge. Geopolitical wild cards like the Russia-Ukraine war that evade the Fed's grasp will shape the outcome. Amidst these crosscurrents, technological forces advance relentlessly. The frantic digitization around COVID-19 now gives way to even more seismic innovations. The meteoric success of AI like ChatGPT provides a mere glimpse of the transformations coming for healthcare, transportation, customer service and virtually every industry. The promise appears gargantuan, with AI generating solutions and ideas no human could alone conceive. But the warp-speed pace also carries perils if ethics and safeguards fail to keep up. Mass job destruction and wealth hoarding by Big Tech could ensue absent mitigating policies. But wisely harnessed AI also holds potential to uplift living standards globally. For investors, AI has already jet-propelled leaders like Google, Microsoft, Nvidia and Amazon powering this tech revolution. But smaller firms wielding these tools may also see jackpot gains, as costs plunge and new opportunities emerge across sectors. That's why non-US and smaller stocks may provide superior opportunities versus overvalued big US tech. In conclusion, the global economic and financial landscape simmers with familiar threats and novel technological promise. Inflation may moderate but seems unlikely to vanish given lingering supply dysfunction and distortions from massive stimulus. Stocks navigate shifting sentiment amid rising rates and demand doubts. And machine learning progresses rapidly into a future we can now scarcely envision. Nimbly navigating such turbulence requires flexibility, tech savviness and philosophical courage. Responsibly steering AI's development is a herculean challenge, to maximize benefits and minimize pitfalls. Individuals need to stay skilled while advocating protections against job disruption. Policymakers face wrenching tradeoffs between growth, inflation and financial stability - all compounded by geopolitics. Yet within uncertainty lies opportunity for those poised to seize it. The future remains ours to shape, if we summon the wisdom and will to guide technology toward enriching human life rather than eroding it. The road ahead will be arduous but need not be hopeless, if compassion and conscience inform our creations.
NASDAQ:NDXEducation
by BitcoinMacro
The Powell meme bomb & pivotThe fed and Powell have tried everything to dismiss inflation . First ignoring it then saying transitory then changing the perimeters as to how it's calculated. Even Sleepy Joe then chimed in at one point by saying hotdogs are actually cheaper for your red white and blue lies. How about awards... Let's give Ben Bernanke the noble economics prize during this all of this insanity! How about an Oscar to a president? (Sean Penn to Zelensky) yeah why not?? Giving Bernanke an award like "Noble Economics" is like calling Dahmer chef of the year! What the heck is going on? People are so broke they can't even pay attention! Has reality become the twilight zone? or was it always? Who are these people that rule us? Can they really be this incompetent? If so why is there no accountability? Now to Powell and gang. Last year they were caught for insider trading, what was their punishment? They were forced to sell their stock, at record gains mind you. Really... that's a punishment now? No one even batted an eye. The west has become a bunch of zombie filled degenerate nations with it's citizens consuming filth at record pace even Usain Bolt would be envious of. For this charade to keep going, you need to print more zombie snacks (dollars) there is no other way. I do believe the market is pricing in an inevitable Fed pivot at the moment which could turn out to be a sell the news moment next year at some point (not Financial advice). Psychological warfare. The Psy-op being played has been ramped up to new levels the past couple years and it is being reflected in the market due to technology with access to investing now easier than ever with a device sitting in your pocket, just add a little emotion with degenerative news and voila. The Pivot will eventually come, but will be the long term effects of it? Anyone can assume but simple 101 Noble Bernanke economics will tell you it ain't good. Anyway, this is my rant for the day. Actually, I have a question. What effect do SEC (crypto) rulings have past American borders? Here is my opinion, (crypto specifically) They have no jurisdiction past American borders so the effect is limited if any. In my opinion these negative rulings will only stifle any American innovation and growth of the sector. It actually just opens doors for other countries to take advantage of it as crypto is global. Please give me your thoughts on this down bellow. Special Guest Appearance George Carlin Thanks WeAreSat0shi Stay Blessed!
TVC:DXYEducation
by WeAreSat0shi
2
Will The U.S Dollar Collapse ?OANDA:XAUUSD Currencies fall for various reasons and they include: 1. Political or economic disorder 2. Hyperinflation 3. War 4. A labor market decline 5. Recession, among various other reasons. 1.The United States has weathered several political and economic disorders since its formation in 1776. The country was on the brink of collapse during the Great Depression in 1929 but successfully weathered the storm in 1939. Not only did it withstand the Great Depression, but it also fought World War II with valor the same year. The will to overcome all odds is in the blood of Americans come hell or high water. Therefore, the US has more chances to overcome political or economic disorder due to this very spirit. 2 Hyperinflation Inflation in the US is high but has not reached hyperinflation yet. The Federal Reserve managed to bring down rates from 8% to 6.5% and are rowing the boat, despite muddy waters. Hyperinflation taking over the country with daily essentials becoming 50 times more expensive might never be a reality. 3. War The US is technically not at war but funds wars overseas, be it Ukraine, Syria, and Yemen, among other countries. A rogue nation attacking the US since 9/11 is nil, and the country is not at war today. The US is more equipped to handle and thwart terrorist attacks today than it was ever before. 4. Labor Market Decline The job markets remain robust despite several leading tech firms firing thousands of employees since 2020. Businesses are thriving, and jobs for small and big-level employees remain open for hire. Though the job markets remain on shaky grounds, it managed to sustain and grow, even in muddy conditions. 5. Recession While talks of a recession are growing louder, a recession has technically not hit the markets yet. Both the stock and cryptocurrency markets are doing favorably well in 2023 and generating decent returns for investors. However, a recession cannot be ruled out, as there’s pressure on the financial markets. Considering all the above points, the US stands in a favorable position with the only recession being its weak point. Moreover, since a recession is yet to arrive (or might not arrive), the weak point can be removed for now. In conclusion, the other sore spots can be worked upon and brought under control in the coming years. So Will The US Dollar Collapse? BRICS is yet to finalize a new currency in the upcoming summit in South Africa. The problem with BRICS nations is that decisions are not made swiftly and quickly due to various factors. Asian countries working with each other is not as easy as said. The factors involve India’s broken relations with China and vice-versa. India and China have always been on the wrong ends, and the bitter political disputes could only make things worse. Technically, the US dollar is backed as the default global reserve currency with billions worth of trades being executed each day. The US dollar has a special status globally and is considered one of the safest currencies. The United States is still the biggest economy in the world with an annual GDP of around $23 trillion. Even if the US falters, it always has and will find a way to remain at the top and be an undisputed global leader. The Great Depression is one big example of how nothing is impossible for Americans to succeed in troubled times.
OANDA:XAUUSDEducation
by INVESTRONE
Hyperinflation WARNING ! 🚨🚨🚨⏰Now that I have your attention. I would like to discuss the history of hyperinflation and explore certain aspects of it to enable more informed decision-making in trading and investing. Hyperinflation is a situation in which the general price level of goods and services in an economy rises rapidly and continuously, often by more than 50% per month. History of hyperinflation During World War I, many countries printed large amounts of money to finance their military expenses. This led to a significant increase in the money supply, but after the war ended, the demand for goods and services declined sharply, leading to a mismatch between the amount of money in circulation and the supply of goods and services in the economy. As a result, many countries experienced hyperinflation, with prices rising rapidly and continuously. For example, in Germany, the hyperinflation crisis of 1923 saw prices double every two days, with the value of the currency ultimately collapsing. This was caused by a combination of factors, including war debt, loss of productive capacity, and excessive money printing. During and after World War II, several countries experienced hyperinflation again. Some of the countries that experienced hyperinflation throughout this period include: Germany: During World War II, Germany again experienced hyperinflation due to the massive amounts of money printed to finance the war effort. Hungary: In Hungary, hyperinflation occurred after the end of World War II due to the government's attempts to finance the reconstruction of the country, combined with a lack of goods and services. Poland: Poland experienced hyperinflation after World War II as a result of a combination of factors, including wartime destruction, Soviet occupation, and economic policies that led to a decline in production. Greece: Greece experienced hyperinflation in the aftermath of World War II due to political instability and a lack of economic resources. China: During the Chinese Civil War, hyperinflation occurred due to a combination of factors, including wartime destruction, a lack of resources, and the printing of large amounts of money. These countries experienced hyperinflation due to various reasons such as war, destruction of infrastructure, political instability, and printing of excessive amounts of money to finance government expenditures. The resulting hyperinflation led to a decline in living standards, widespread poverty, and economic instability. Upon reviewing a brief history of hyperinflation, it is reasonable to expect cyclical patterns, although these may not be exact, they can be quite similar or closely related for the future. Key factors to look for before hyperinflation occurs Rapid money supply growth: Hyperinflation is often triggered by excessive money creation by the central bank or government, leading to a rapid increase in the supply of money in circulation. Unsustainable fiscal policies: Large budget deficits, high levels of government debt, and unsustainable spending policies can also contribute to hyperinflation. Political instability: Hyperinflation can also be triggered by political instability, such as a war or revolution, which can disrupt economic activity and lead to a loss of confidence in the currency. Collapse of the banking system: If a country's banking system collapses, it may be unable to provide the credit necessary for economic growth, which can lead to hyperinflation. Loss of confidence in the currency: When people lose confidence in a currency, they may rush to exchange it for another currency or for tangible assets, such as gold or real estate, which can lead to hyperinflation Currently, we are observing indications of cracks in the system, but we have not ticked all the boxes just yet. While we may be witnessing some of these events, they are not yet occurring on a scale significant enough to result in hyperinflation. It is possible that we may encounter some events of inflation panic before hyperinflation truly comes to fruition. Many respected traders are providing specific dates or timeframes for when the economic collapse may occur. However, it is important to note that most of the time these predictions are off the mark when it comes to timing. It is also important to remember that as a trader, you are essentially betting against those traders who are also betting against you. Thus, it is important to conduct thorough research and analysis before making any decisions. Undoubtedly, inflation is on the rise; however, it is crucial to approach the situation objectively and without emotional bias. It is likely that some of us may make hasty and panic-based decisions in response to the inflationary environment, but those of us who remain level-headed and well-informed may be better positioned to make sound decisions Should I buy and hold Bitcoin or Gold? While it may appear reasonable to assume that prices will continue to rise indefinitely in an inflationary or hyperinflationary environment, the reality is often more complex. In fact, prices can experience whiplash in both directions, as seen in the example of gold depicted in this chart. Note the pattern of rising highs and lows. This pattern may look familiar to those who follow Bitcoin, which has also experienced volatile price swings in both directions. As market conditions evolve, investors and traders must exercise caution while implementing sound strategies to safeguard their financial portfolios. As the market is bound to experience periods of panic in the future, it would be wise to proactively assess your portfolio and take or re-allocate profits accordingly. By adopting a dynamic approach that is responsive to evolving market conditions, you can position yourself for success in an environment of heightened volatility. Thus, it is essential to remain nimble and adapt to changing market conditions to minimize risk and maximize returns.
COINBASE:BTCUSDEducation
by UnknownUnicorn45342505
4
GOLD : Benefits of Investing in GoldOANDA:XAUUSD Gold has been an inconsistent inflation hedge, but there may still be benefits to holding a small amount of the yellow metal in your portfolio. Gold has historically had a low or even negative correlation to both stocks and bonds, suggesting it offers value as a tool of diversification. Gold prices held up pretty well during the Covid-19 pandemic market sell-off in early 2020, for example. From Feb. 1 to April 1 in 2020, the S&P 500 declined 23% while the price of gold dropped less than 0.1%. Demand for gold from investors, central banks, jewelers and tech companies is also growing. According to the World Gold Council, global gold demand increased 12% year over year to 2.189 tons in the first half of 2022. Depending on your individual goals, there are several easy ways to invest in gold. Investors can buy gold bullion, physical bars or coins that can be kept in a safe or bank. You can also buy physical gold exchange-traded funds (ETFs) that hold gold bullion on investors’ behalf. The most popular gold ETF is SPDR Gold Shares (GLD). Investors looking to speculate in the gold market can trade gold futures contracts. These contracts provide significant leverage, allowing investors to control large quantities of gold with a relatively small amount of money. Finally, investors can buy shares of individual gold stocks or a gold mining ETF. The VanEck Gold Miners ETF (GDX) holds a diversified basket of 54 gold-related stocks, including Newmont Corp. (NEM), Barrick Gold Corp. (GOLD) and Franco-Nevada Corp. (FNV). Conclusion : GOLD IS SAFE HEAVEN TO INVEST IN IT .
OANDA:XAUUSDEducation
by INVESTRONE
1
GOLD : What Drives the Price of Gold ?OANDA:XAUUSD Gold is highly sought after, not just for investment purposes and to make jewelry but also for use in the manufacturing of certain electronic and medical devices. As of February 2023, the price of gold was more than $1,870 an ounce. While down around $100 from a high posted in April 2022, it is still up considerably from levels under $100 seen 50 years ago. But what factors drive the price of this precious metal higher over time ? KEY TAKEAWAYS 1 Investors have long been enamored by gold, and the price of the metal has increased substantially over the past 50 years. 2 Not only does gold retain additional value, but supply and demand have a huge impact on the price of gold—especially demand from large ETFs. 3 Government vaults and central banks comprise one important source of demand for gold. 4 Gold sometimes moves opposite to the U.S. dollar because the metal is dollar-denominated, making it a hedge against inflation. 5 Supplies of gold are primarily driven by mining production. Conclusion : Gold Is a high Value Asset , Which Can be Hedge Against Growing Inflation.
OANDA:XAUUSDEducation
by INVESTRONE
How to Reduce Inflation in South Africa in 2023! - 5 WAYS!How to Reduce Inflation in South Africa in 2023! - 5 WAYS! I got this excellent question today from someone Which I thought was an important question to answer considering the state of the Country of South Africa. Hi everyone. In SA I always wonder how an ordinary person "employed or not" can contribute to bring positive change to our inflation? A. Here is my answer... As an economist, I can say in theory it is possible to bring positive change to the inflation rates but in reality – with corruption – I’m not sure it’s that easy. Also, it’s the butterfly effect where we need to come together as a community (country) to work towards lowering inflation. So on the one hand, there needs to be less spending unfortunately. Here are a few measures I can think of… #1. Lower non-essential spending. People need to stop spending unnecessarily on products and services and instead start saving more for their future. This will hamper and reduce the impact of inflation. #2: Support your local places! This world is becoming highly globalised not only where the rich get richer but the TOP stores and shops get richer too. As a community, we need to start supporting the local businesses that have great quality products and services to. We need to be more friendly to each other and help spread awareness to the small but great man. This will help stimulate the local economy and bring on more job creation and economic growth. #3: More investments in education Education is key to help bring personal development and skills training. We need to educate our fellow people on business skills, high income skills, programming, AI, machine learning, savings, risk averse investments and encourage more businesses to help grow. #4: Save more to invest more When inflation is high it means people were spending uncontrollably which pushed up demand and lowered supply. Instead, we should encourage more savings in stocks, property, trading, funds, and personal finances to reduce the effects of inflation. Instead of drinking sorrows away, spending on games to bide time – focus on less spending and more saving for the future – reducing the debt levels. #5: Invest in renewable energy Load Shedding is here to stay. And so we need to try to support more renewable energy initiatives that come about. Solar, wind and gas. This will definitely help reduce the cost of energy and curb inflation. As I said, we can only do our part and hope for the best. We are a nation with hope, optimism and trust. But instead of just trusting the government we should also learn to support and trust our local businesses and methods to living a better life. Hope that helps.
ECONOMICS:ZAIRYYEducation
by Timonrosso