As a financial market trader, it is important to understand that the discipline requires a certain amount of determinism. There are underlying laws that govern financial market change, and these must be deciphered and clearly understood if people are to achieve their dreams of profitability.
Take the emerging markets, for example, which have typically outperformed during periods of economic growth and rising confidence. Conversely, these markets have emphasised the downward trends during times of austerity, as investors have sought flight and adopted an increasingly risk averse approach.
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The Emerging Markets and Changing Trends
In recent times, however, this simple and understated law has been undermined. This year, global markets have benefited a recovering American economy, which has caused the value in emerging entities to fall considerably. This is despite the fact that the recovery remains tentative at best, and this alone suggests that emerging markets are losing their short term appeal to investors. Unfortunately, this is the case across multiple companies, with nations such as Brazil, India and Chile all experiencing sudden and unexpected economic decline.
At the heart of this decline is the issues that have faced China, which just 18 months ago was being touted as having the potential to supersede the U.S. as the world’s leading economy. Since the heady days of double digit GDP growth, the nation has delivered economic data that has fallen far below expectations, and this has impacted significantly of developing markets that had come to rely on China’s exports. In this time, growth in India has halved by Brazil recorded economic growth of less than 1% throughout the last financial year.
At the other end of the economic scale is the U.S., which has experienced considerable growth thanks to stimulus measures introduced by the federal government. As a result of these measures, U.S. interest rates have remained low and played a pivotal role in empowering consumer spending and soaring confidence. With the minutes of the latest policy meeting suggesting that these measures may soon be withdrawn, however, it has yet to be seen whether the U.S. can sustain this momentum and continue to drive growth in developed economies.
The Last Word in the Emerging Markets
While value in the emerging markets may be depreciating, there is nothing to suggest that is a permanent state of affairs. In fact, the trend may well be reversed during the forthcoming financial quarter, as stimulus measures are withdrawn and economies in the U.S. and UK face the prospect of diminishing growth. Regardless of this, however, the prospects for future growth in the emerging markets remain prominent, and this is something that investors interested in long term gains would do well to heed. To understand more about the emerging markets and your options as an investor, visit the Alpari website today.
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