According to Nigel Green, founder, and CEO at DeVere Group. Many foreign powers can impact the US economy and political and economic influences drive capital markets. In this article, we are going to break down his statement and tell you more about it!
The financial markets due to Impact on Foreign Powers
The financial markets of the US happen to always sway to every little twist and turn of the political landscape of the country. Along with the divorce proceedings of Britain from the European Union. These obsessions are completely understandable. It is majorly because the United States, the United Kingdom, and the EU are three of the biggest and most influential economies in the entire world.
Therefore, with the current state of things such as Donald Trump’s alleged ties with Russia along with Britain. The EU now starting to launch 2 entire years’ worth of negotiations related to Brexit could very much ultimately lead to having far-reaching. Impactful consequences for the US financial markets which are concerning.
Also, now in recent weeks and months, it has been observed how investor confidence has shifted to a great extent with such geopolitical factors. Now coming into play on May 8, a 23- year low of 9.77 was finally struck. The VIX index also sometimes referred to as the “fear gauge” of implied volatility on the S&P 500. Then happened to rise sharply to over 15. During the following 10 days in response to the latest upcoming twist in the investigation. Which probed into Trump’s alleged links with Russia and to a lesser or subtler extent corruption allegations. That has made against Brazil’s President Temer.
It then happened to fall back after spending June hovering between 11 and 10. This is because the investors tried to reason that a presidential impeachment may not happen to affect the entire U.S corporate earnings to a huge extent.
This shows us that while geopolitical triggers may certainly provide us with many more such spikes as were observed recently. Therefore, we should keep in mind the broader factors that drive stock markets. Now, the primary and biggest among these positive factors are the U.S. and global corporate earnings growth figures. This also includes the likelihood of the global monetary policy remaining not very tight throughout the world for the upcoming foreseeable future.
Now, on the other hand, one potential trigger for a rise in the VIX. That can create a lot of mayhem on global capital markets. The potential downturn in China’s increasing taste for credit.
Foreign Powers Impact the economy
Since the country began its enormous stimulus in 2012, Chinese credit has largely helped to underpin the global economic growth. China’s investment in areas such as real estate and infrastructure has also put an amazing protective cushion under the emerging markets as well as commodity prices. Therefore, when it comes to foreign powers that can impact the economy, one should not ignore China and Europe.
This brings us to the end of our discussion on foreign powers that impact the economy. Now, let us know some of your thoughts on the same.