As countries and local governments restart global economies, stocks fluctuate in response to every word, tweet, or action from political figures. Democrats and Republicans are at odds on the best way forward financially in the US, making trading speculation challenging. Surprisingly, the Asian markets such as China, from whence the Covid-19 virus originated, provide some of the most relevant clues for investors and brokers who seek hints for trading in an uncertain financial climate.
It was in early March when most of America became aware of the dangers associated with Covid-19. Almost overnight, businesses, schools, and agencies shut down, sending the economy into a tailspin. With millions on unemployment, the pandemic’s politics evolved into a game of who is to blame, placing additional acrimony on already strained relationships between countries and political parties. Global economies continue to fluctuate sharply in response to uncertainties surrounding the market. Even the US presidential nominees have not been left unscathed, with President Donald Trump and former Vice President Joe Biden defending themselves against actions and comments made in the wake of the crisis.
Lessons from China and Japan
Like the US, China’s financial climate is improving while other parts of the world are experiencing problems in the wake of battered confidence in the private sector. China’s economic activity beats pre-pandemic levels, making the country a leader in economic recovery and possibly an example for developed countries to follow. By all accounts, China’s success in curbing infections and reducing the spread is allowing for a dynamic financial recovery effort. Led by manufacturing and retail, the country has seen increases in global trade, a bedrock for the nation’s economic recovery.
Japan’s retail sector, including online virtual Mercari Inc., is surging to its highest point since 2006. Several Japanese businesses are benefiting from the country’s digitalization. From telemedicine to signature services, the increase in online activity since March is aiding Japan’s internet-based companies. In fact, 322 startups and small businesses have seen a 50 percent rise in income. Mother’s Index of Tokyo Stock Exchange is one of the best performing in the region, surging in the wake of retail investor interest. Other stocks in Japan are taking a hit after a retreat from Wall Street.
Restarting Global Economies
Developed and undeveloped nations are reopening. However, the long-term success of opening the economy remains to be measured. Even countries who were among the first to reopen, such as Germany, Austria, and Demark, have carefully curtailed restrictions. Citizens are happy to be free of lockdown. Still, seven out of 10 European countries are very much affected by the virus. According to the Center for Disease Control, preventative measures, like social distancing and wearing masks, are effective. But some states in the US do not mandate masks, and even in places masks are mandated, wearing is not always enforced.
Experts warn that it’s not safe to reopen completely until a viable vaccine is found. Still, global, national, and local governments are moving in phases to reopen schools and businesses. Private sector companies are making decisions independently, with some major corporations and associations deciding to allow employees to work from home indefinitely. However, if unemployed workers remain home, global economies will suffer. Politicians are grappling with economic challenges and balancing decisions that will impact the lives of millions over time. Overall, economic growth remains slow for states, even as some states move to final reopening phases.
Still, some sectors are prospering despite global recessions, such as information technology, food delivery, online education, money lenders, and entertainment. With most global populations continuing to spend more time at home, much of that time is spent online. Information technology firms are working with companies worldwide to facilitate distance working and learning opportunities, sparking a surge in revenue in the IT sector. To avoid large supermarket crowds, more people are ordering grocery and restaurant food from home. Companies are fighting to maintain a share in the $200 billion online delivery and $16.6 billion app market for deliveries. In fact, at least one service, Door Dash, has increased its market valuation to $16 billion amid the crisis.
From gold prices to trade, America’s financial climate is in a state of fluctuation, responding to the challenges of a global pandemic and the possibility of gridlock if the election ushers in divergent political parties to the House, Senate, and White House. As of publication, some polls show former Vice President Joe Biden with a double-digit lead over President Donald Trump, in part from push back against the impact of the global pandemic and millions of US citizens who are overcoming economic woes from the downturn in the economy. Trump and Biden offer different plans for a path forward, including striking differences in financial strategies that will impact the financial markets and the global economy.
Investors are seeking the familiar in the current economic climate. After hitting a high of more than $2000 per ounce, gold prices are hovering at the $1900 mark. In October, in response to the uncertain financial climate, investors are buying in gold as a haven in uncertain times. Economic and trade challenges continue to plague the current administration. With the trade deficit 40 percent more than when the Trump took office, it is unclear whether the trade war shall continue, regardless of who wins in November. Neither candidate indicates an intention to end measures against China in trade. While the Dow Jones generally rises near presidential elections, it has taken a recent tumble in the aftermath of Treasury Secretary Steven Mnuchin’s announcement that no stimulus package is likely before the election, adding more volatility to already unstable financial markets. Democrats and Republicans remain at odds over critical points in the stimulus deal. It’s unclear how many of the differences are based on policy or political posturing.
2020 Forex Trends
One thing is for sure, the next president will begin his term facing a pandemic, strained relationships with historical allies, and global financial challenges. However, from a financial perspective, the outlook is not all dire. Even in a recession, bright spots in the economy are giving clues to where Forex traders may focus on investment priorities. From the Asian markets, the retail sector is taking off, fueled by strong online shopping trends in Japan. As Japan continues to invest in digital infrastructure and policies to support small businesses focusing on online business, it leads the region in retail market growth. In fact, USD/JPY is the top currency pair and makes up 17 percent of all transactions in the currency market. Meanwhile, promising manufacturing and trade data from China indicates that containing the virus may result in immediate economic recovery, prompting investor interest in vaccines.
Pharmaceutical firms that focus on research and development are not the only companies that are drawing new investors. Businesses essential to the new, global work-from-home culture, such as information technology, food delivery, and online services, give investors an understanding of how to navigate the financial markets by focusing on which companies are enjoying increasing revenue and profit. Despite political turmoil and challenging economic forecasts, some businesses are prospering. For Forex traders, these companies provide a pathway forward in implementing productive trading strategies that align with current market trends.