Why Covering The Markets Is So Fun
REUTERS/Joachim Herrmann
After 6 fantastic years, today is my last day at Business Insider. Nich Carlson wrote about that here. While my responsibilities have broadened some over the years, I've really developed a love of covering the markets, and that's what I'll be doing at my next job.
A tweet I saw the other day reminded me why market coverage is so great.
Here's what that means.
6 days ago, when that tweet was made, markets all over the place were plunging. Market volatility was surging to levels we haven't seen in a long time. And everyone was worried about whether this was "it," the big selloff everyone was waiting for.
Also weird things sometimes happen, and relationships you're used to seeing start to go in reverse.
Now lately, what you'd expect, is that when good economic data gets reported, the US dollar rises. Why? Because strong economic data is seen as bringing forward the first interest rate hike. And higher interest rates tend to lead to stronger currencies. (And anyone should be able to understand this. You're going to want to put your money in a currency that pays a higher interest rate, all things equal).
But when it gets really interesting is when people REALLY freak out about the economy and markets. While market panics are seen as delaying Fed rate hikes, the US dollar tends to perform very well in these environments, because it's a safe haven. When people panic they want CASH. And they don't want just any cash. They want the one currency that's dominated the globe for ages and ages and that's the dollar. So bad news, rather than being seen as negative for the currency becomes a positive. Cause everyone just wants safety.
And then in this environment, strong economic data can be seen as soothing people's concerns about the bottom falling out, and so that actually causes the panic bid for dollars to fade. So dollars weaken on good news.
Financial markets are filled with non-intuitive relationships, and what's awesome is things are always changing. It's kind of like that poem about the blind men feeling different parts of the elephant and coming to different conclusions about what they're touching. Except in this case, they're touching some kind of shape-shifting animal, so that not only are they all only getting small parts of the picture at any moment, the picture never stays the same.
And that's why covering financial markets will always be fascinating.
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