Stock markets have been on the up and up, setting new records and getting the appraisal from US President Donald Trump. The most recent rally in markets is accompanied by the synchronized global growth and has also seen a “risk on” environment which saw funds flowing out of the US dollar, contributing to the downfall.
Yet if stocks finally turn around, everything can turn around.
The long stock market rally, which was slow but very consistent, was also “the most hated rally”. After such a long period of gains, many expected a big drop. But if the fundamentals of stocks are solid, the rally makes sense. Growing company profits support higher stocks regardless of monetary policy, politics, etc.
A small turnaround in fundamentals could trigger a bigger move. We have seen two significant events:
Apple, the world’s most valuable company has reportedly slashed the production of its top iPhone, the iPhone X due to weak demand. The stock naturally dropped. Apple is still a very profitable and rich company that and its other iPhones and products are selling very well.
So why is this event mentioned on a site dedicated to currencies?
Because we soon had another event
Amazon, Berkshire, and JPMorgan announced the launching of a new healthcare company that aims to reduce healthcare costs. Health stocks dropped. Here, we are seeing a case of a big sector rather than one company. Nevertheless, this could have remained only a story related to that sector and not to global markets.
Yet with highly valuated stock markets, this two sparks could turn into a fire. And if stocks begin selling off, we could see the US dollar and the Japanese yen make gains against all the rest.
Is the stock market rally finally coming to an end?
Here is the daily S&P chart. We certainly had a rally. The last two days have seen falls. Is it just the beginning?Get the 5 most predictable currency pairs