What’s Going On Here?An economic survey out on Tuesday showed investors feel better about the current situation than economists thought. Here’s hoping they’re not all just playing follow the leader... What Does This Mean?Every month, a major German organization surveys around 300 finance experts about their expectations for the economy. And on Tuesday, it found that lots more of them were feeling positive about the recovery than economists – who watch the measure closely for clues about what investors are thinking – realized.
That optimism – which might now be egged on by claims of an approved coronavirus vaccine in Russia – was reflected in the key US stock market index, which is close to an all-time high. But the tensions between the US and China could yet spill over globally, leading some investors to run for the shade of “safe havens” like the Japanese yen. Why Should I Care?For markets: You need new rose-colored glasses.
Optimism can be infectious, and so can investors’ eagerness to buy, buy, buy. After all, no one wants to perform worse than their rivals because the rally leaves them behind (tweet this). That could – gasp – encourage other investors to yank money from their investment funds. But all it takes is a few high-profile investors to sour on stock markets, and the rest might suddenly sell, sell, sell – or else risk being left with stocks no one else wants.
The bigger picture: Kick back and relax.
Financial markets – everything from bonds and stocks to commodities and currencies – typically take a breather in August: investors tend to go on vacation, leaving fewer folks around than usual to buy and sell. And that can lead to bigger rises and falls in asset values. Case in point: the euro’s value rose 0.5% on Tuesday – a relatively big move for a currency, and one some analysts reckon would never have happened if more investors were at their desks. | 