(Newswire.net — June 27, 2016) — Recent economic data released by various US Government departments is pointing in just one direction: despite the Brexit vote, the US economy is getting stronger. Here are a few highlights.
The US Commerce Department announced on June 14 that retail sales for the month of May grew by 0.5% compared to retail sales in the month of April. This suggests that consumers have more money spend. This almost only happens in growing economies.
Moreover, when you consider that analysts polled by the Wall Street Journal expected an increase of 0.3% in May, it becomes clearer that the economy is moving in the right direction.
Earlier in June, data showed that manufacturing rose to three-month high. This is indicative that the supply-demand scale is tipping in the favor of demand. Improving demand indicates that businesses and consumers have more money to spend.
Sales of new and existing homes have also been increasing, bringing about price increase. Positive home sales trends again indicate that consumers have more confident in the strength of the economy.
The employment data for the week ended June 17 indicates that unemployment fell to almost a 43-year low. This comes after a rise in unemployment rate in May. But analysts believe the improvement from last week indicate that the economy will again register strong growth during the second quarter.
It is unlikely that the worldwide turmoil caused by Great Britain’s vote to leave the European Union will cast a long enough shadow on the growth trends that seem to be gaining grip on the US economy.
The upward trend means that a benchmark interest rate hike is may to happen soon. Whenever it happens, the markets will react.
As for companies, the theory is that a rake hike makes it more difficult to obtain funds with favorable terms to facilitate growth. This, therefore, brings about a reduction in the growth prospect of certain companies – a phenomenon that doesn’t favor stock prices.
Many times, if the Federal Reserve ignores signs of weakness in the economy during a monetary tightening cycle, the stock market crashes. But many times, the reality doesn’t follow that theoretical trajectory. However, this doesn’t stop the market to react as though that would be the reality.
Many analysts would tell you to consider adjusting your portfolio to benefit from Fed’s decisions. And there is nothing wrong with that.
However, as it is with most things in life, that there are good and bad times, economic booms and crises are a certainty. But you wouldn’t change your life discipline because of a bad time, especially if it is the right kind of discipline. In the same vein, if you have done your due diligence to set up a portfolio according to your needs and goals, even a recession shouldn’t change your investing discipline. Of course, it’s okay to rebalance your portfolio as needed. But it would be out of place to embark on a portfolio overhaul because of a bear market. In reality, the bear market would become bull someday. And sticking to your discipline would mostly pay off over the long haul.
For those who would want to benefit from a US rate hike, though, there is better opportunity in the forex market. The reaction in the forex market to this kind of activity is usually more predictable than in the stock market.
The reason is simple. A rate hike in the US usually increases the value of the dollar relative to other currencies. Just how big the increase in value would be depends on the strength of other currencies.
However, considering that there is weakness in the Eurozone and emerging markets, you can expect that the dollar would strength meaningfully against global currencies. So you should expect that there would be a lot of activities going on in the forex market once a rake hike happens. Trading binary options can be a way to hedge against the Fed’s decision, or other currency movements.