Yellen Talks Spike Market

FED News around the Corner

The biggest news of the week is that the chairwoman of the Federal Reserve, Janet Yellen, has recently reiterated the Fed’s stance that they will remain dovish in regards to rate hikes for the time being, keeping them at the level that they’ve been at since December. That was the first rate hike that there had been in over seven years, and it set the U.S. economy reeling for a little while. Because Yellen has been more conservative with increasing borrowing rates than many investors and traders originally thought she would have been, the U.S. stock market had a late day rally on Tuesday, March 29th, boosting many positions into the green for the day. This kind of momentum is likely to keep going, but there are a few things that you need to be aware of before you start taking out as many long positions as you can. Looking at the motivation behind this move is a good place to start.

Coupling the Fed’s moves with what’s going on in China, it can be seen as a very smart move for the U.S. business front. Because the Chinese economy is shifting toward a heavier dependence upon consumption, their economy is going through some major changes, and many of the top companies in China have begun to decline rapidly in value. This means, among other things, that investors have been cautious in China, and this has had a major impact on the U.S. economy. What has happened is that China’s declining index values have caused investors to panic in the U.S., even if that wasn’t necessarily the correct move. China’s economy had been heavily focused on industrial production, and that has lagged thanks to the shifts. The companies that stood to benefit from shipping raw materials into China have been hurt, too, and the reverberations of this have been felt worldwide. Yellen’s stance should help to alleviate falling business prices in the U.S., at least until the Chinese economy has found some new stability.

As short term traders begin to evaluate their game plans, though, there is another thing to consider. Many countries across the world have begun instituting negative interest rates. This has made it so that other countries have a stronger business foundation when it comes to expected growth right now than most U.S. companies have. It is easier for a Japanese business to get a loan at a low rate than it is for a U.S. based company, and this has made it so many American traders are looking to foreign markets because of the potential for more aggressive immediate growth. The obvious drawback is that with exchange rates, huge amounts of capital are needed to make this remotely worthwhile. The dollar is strong right now, and that means that you are losing money right off the bat by converting to the yen or the euro, or almost anywhere else. One way to overcome this is through binary options as these allow traders to make money off of the ups and downs of foreign companies without needing to convert their home currency. It saves a step, and allows the same quick growth that traders are flocking to foreign markets for in the first place. This is perfect for traders with a capital base of less than $100,000, and it evens the playing field at the same time. Even larger traders can benefit from this as it can help spread out risk by limiting the amount of exposure that you will ever have to take on with a given position because of the short expiration times that you can select from.