Why Global Stocks May be Running Out of Steam

The global economy has embarked on an unusual journey in the last twelve months, as despite pessimistic reports its has actually experienced noticeable growth. This is especially true in developed economies such as the U.S. and UK, while emerging nations have suffered from stagnation as the trends established last year have been reversed.

 There are signs that this growth is wavering, however, with the global economic recovery remaining fragile and decidedly unstable. This is having an impact on the financial markets, where global stocks appear to be running out of steam after a year of continued success. So while equities remain the best performing asset so far in 2013, investors may be wise to consider alternative options for the year ahead.

 Can Forex Options Provide the Answer?

 Another key investment vehicle for traders is currency, which may therefore offer a viable alternative in the months ahead. While the level of volatility and uncertainty in the forex market makes it extremely difficult to predict over a prolonged period of time , however, its recent robust performance and the margin-based returns available make it ideal for investors with a knowledge and a keen appreciation of risk. Investors will need to tread carefully, however, as currency value remains vulnerable to sudden and negative economic developments.

 The course of the Euro zone recovery will play a key role in the forex market in 2014, although it is unclear exactly which direction the region will head in. With the final revision of October’s Eurozone CPI data due to be unveiled over the weekend, however, investors will be offered a keen insight into what they can expect in terms of performance. After the preliminary numbers had a profoundly negative effect on the value of the Euro when they were released two weeks ago, it is clear that the forthcoming data will have a similar impact one way or another.

 More specifically, a downward adjustment is almost uncertain to send the value of the Euro plummeting further, while an upgrade would have the potential to trigger a long-term rebound. Either way, traders who are active in the forex market should be able to benefit, by either backing their Euro or investing their money in the U.S. Dollar (USD) or the ever-improving Great British Pound (GBP). This situation embodies the benefits of trading in the forex market during uncertain economic times, as while it is a volatile environment it always generates opportunities for traders to make a profit.

 In contrast, the value of equities are almost entirely dependent on positive economic sentiment, as recession triggers a reduction in consumer spending while the value of individual stocks begins to dwindle. While this does not necessarily apply to the type of blue-chip firms who are suitable for the dividend investment model, however, those in search of significant financial returns would do well to prioritise currency as the stock market depreciates.

2 thoughts on “Why Global Stocks May be Running Out of Steam”

  1. I agree with you that Equities seem to be overvalued presently and it is getting more difficult to find value to invest in equities. Forex seems to be an alternative but we will need to be cautious with the usage of leverage. In fact, an investor of forex can even receive positive interest for holding the currency position by investing into the currency that provide a higher interest rate. There are many more advanced techniques about such carry trades which I think your blog will certainly be able to teach many people.

  2. What about investing in a international stock market index fund? Do you think that would offer some protection about the drop off you are talking about. Have you had much experience investing in international currency? It isn’t something I’m familiar with but if it offers potentially good returns I’m interested. Your thoughts?

Comments are closed.