Forex Investment and Currency Trading

No, the economy will rebound, and so will profits. Markets will respond positively. The timing of a turnaround remains uncertain and will be closely linked to expectations of rebound. The dramatic declines in the US and global stock markets have discounted expectations of deep and prolonged recessions and depressed profits, reflecting in part uncertainty stemming from the financial trauma. No question, recessions in the US, Europe and Japan are deep and the hit to profits substantial. However, at issue is how long the recessions will last. Aggressive monetary and fiscal stimulus in the US is expected to improve economic performance and lift profits. Profits are not expected to rise until aggregate demand in the economy rises. As market participants begin to anticipate that the recession will eventually end, stock market values will rise. During typical cycles, equity markets begin to improve before the recession troughs. Evidence that US monetary policy channels are loosening and the declines in housing are running their course are likely triggers that will initiate improving stock values.

Global stock markets would receive a boost from an improving US market. However, economic performance and profits hold the key. One expects the increasingly aggressive government actions in Europe and Asia to boost prospective conditions. Over time, that means higher global stock valuations.