This morning’s employment report will be added to the anthology of reports that contribute to the current ethos of market participants. At the center of the economic reports both domestically and internationally are larger themes including economic theory, monetary and fiscal policy, foreign exchange and interest rates. Among portfolio managers, traders, and investors, the greater reasons for potential market volatility revolve around global economic stability, relative strength and weaknesses of major currencies, and the inevitable central bank actions and commentary.
Although the current market displays occasional signs of complacency and range bound behavior, certain current and near term factors contribute perspective volatility. In the shorter term, the global political figures are focused the ongoing refugee crisis in Europe and the upcoming “Brexit” vote in the UK.
The greater economic fears among market participants are the prospect of deflationary pressures on the European continent, the recent fluctuation of the Japanese Yen, and the implication on the US dollar.
Why should all of the aforementioned aspects be followed and observed by most if not all who are involved in the markets? The global and domestic economic activities have impacts on earnings as they relate to international conglomerates, commodity markets as they are dependent on currency fluctuations and currencies which have a clear impact on every aspect of economies. The final implication of these intertwined factors have bearing on macro market performances, individual equities and their respective derivatives, and more importantly the impact on the returns of portfolio managers as they relate to pension funds, hedge funds, and mutual funds.
