1. Strong US Buck - Bad For The Economy?
Since late the month of january , the US stock market has been in a decline. While the longer term,
positive pattern of the market remains intact, we are around the corner a "line in the sand" moment
with regard to market watchers.
The market had been inside a strong uptrend because March of last year , but has recently damaged
that trend. This may simply be due to profit taking as investors look to reallocate their portfolios, or
this may be something worse. While the S&p 500 index is within a very textbook as well as orderly
decline, market watchers will be exploring the 200 day moving average to get a longer term
perspective of the market's general direction. Bullish investors like to see a market trade above the
actual 200 day moving average. Violating the actual moving average is a great indicator that the
market trend has changed.
As the market diminishes to meet up with the present 200 day moving average, traders is going to be
closely watching to see if buyers return to the market. If buyers don't come back to the marketplace at
this level, it is a good indication that the majority of market participants feel that some thing has
fundamentally changed (e.g., greater chance of a double dip recession, higher than expected tax
raises , poor corporate earnings , etc.).
This raises the question: exactly what has changed in the us economy? Answer: the actual comeback
of the us dollar. While most politicians like to brag about having a strong buck policy in place, it isn't
that excellent during a weak economy. A strong dollar makes us products more expensive overseas.
Since the market meltdown in 2008, the united states dollar has been really weak when compared
with its peers, such as the euro. This has helped strengthen the US economy by 50 percent ways.
First, the products are cheaper and much more competitive overseas. Second ,our products are less
expensive and more competitive home. The US economy is basically based on consumers. The more
consumers buy us products, the better it's for our economy.
Historically, the US has always been the actual safest currency on the planet. Last year, many
countries sold the US buck and moved their cash to the Euro or into Asian foreign currencies.
However, the recent news that a holiday in greece , a Euro country , may be the next "Iceland"
(insolvent) has caused international currency investors to run back to the US buck - thus resulting in
the US dollar in order to strengthen.
How is the Rothe Financial group using our absolute Return Strategy to take advantage of these
market indicators ? Right now, the positively managed portion of the portfolio has been moved to
cash as we wait around to see if the 200 day moving typical is violated. If the moving average is
actually violated, we will after that begin to add inverse investment positions which provide us a
unique opportunity to profit inside a declining market. We'll continue to follow these trends closely and
update our strategy when needed to maximize our clients' profits regardless of market conditions.
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