The complexity of today’s global financial market is far beyond a single blog post. However, in this piece we will highlight some of the key factors at play as the world teeters back and forth from the brink of a financial crisis. Unlike decades past, the major economies are interdependent and what impacts one has a ripple effect on the others.
Financial Market Basics
The financial market revolves around three primary types of investments that are widely traded on national and global exchanges:
Stocks are the same in any language. Each stock constitutes a share of ownership in a company. It’s that simple. Conversely, what’s hot in one market might be falling in another. For example, as this blog is being written the U.S. stock exchange is experiencing its best day so far in 2014, gaining 1.64 percent. The biggest movers are in pharmaceuticals, mining, and bio scientific technology.
In the U.S., we are familiar with treasury bonds or “T-Bills.” The rest of the world trades government bonds as well. These are offered by country, with economies of all sizes offering investors the chance to diversify their portfolios beyond all boundaries.
Commodities, of course, are the most volatile of investment types. The commodities markets include Energy, Metals, Agriculture, Meat & Livestock, and Consumer goods like coffee, cocoa and sugar. These investments (or “futures”) are traded on the mercantile exchanges and can fluctuate widely over short spans of time.
Key Global Markets
While the global market is far more compartmentalized than indicated here, the following markets demonstrate a good overview of established and emerging economies:
NYSE, NASDAQ, S&P, AMEX
As of this writing in the Fall of 2014, the dollar has been rising against other global currencies. This is contrary to what was being forecasted just a few years ago. Improvements in GDP (gross domestic product) growth show the United States at the top of the global chart with a 0.5 increase from July to October 2014. It is slow growth to be certain, but compares quite favorably to the Eurozone which is trending at -0.3 percent.
Global Dow EU, FTSE, DAX, MDAX, CAC40, SBF80
European financial markets have seen a multitude of new regulations for banking and the capital markets, as well as the establishment of a Banking Union. These regulations, of course, come in response to the “too big to fail” banking and financial crises of earlier years. Looking forward, the Association for Financial Markets in Europe forecasts an aggressive growth agenda throughout the region.
SSE, SZSE, CSI 300
Statistics show that China’s major real estate markets are down 45 percent in the second half of 2014, putting a damper on the robust growth that was underway as people left the farmlands for life in the city. In brighter news, AliBaba is cited as a game-changer for China and the world. The wild card for the nation is the unrest in Hong Kong, which has already cut into the tourism and retail markets.
NIKKEI, TPX, Hang Seng
Financial industry watchers suggest that Japan’s economy is headed for a collapse. The yen is at a six-year low and continues to fall, as the government talks of raising the sales tax to 10 percent in 2015. Weakness in the yen depreciates the exchange rate which in turn cuts deeply into the commodities market, particularly in the areas of energy and raw materials.
BSE, NSE, MCX
The International Monetary Fund (IMF) has improved its growth forecast for India, sending the country’s financial indices on the upswing. Concerns about bad loans and rising interest rates from earlier in 2014 seem to have been quelled by this vote of confidence.