My 2 Cents

Jan 03, 2021

In my humble opinion predicting the future is not an easy task and I discovered at an early age  that crystal balls seldom work.

A year ago, I would not have thought that I would be wearing a face mask to go to the grocery store, spending a socially distant holiday season and celebrating New Year's Eve through Zoom or Facetime. Predicting the future, no matter how much data out there, is difficult .

The global approval and subsequent roll out of COVID 19 vaccines is the beginning of controlling the pandemic. The sun is peeking out from behind the clouds, there is light at the end of the tunnel and economic recovery lies ahead.

The unparalleled GDP contraction globally has been one of the worst for most economies in human history. The IMF is projecting that the national output for developed and emerging economies will contract, with the possible exception of China, which showed early signs of improvement and modest growth.

The speed of the recovery is a difficult question to answer because of the differences within the economic zones.

Forbes and other analysts are predicting a -4.7% contraction for developed economies (except China) and a staggering -8.1% for emerging economies. 

We can expect Central Banks to position their policies towards a prolonged recovery by keeping interest rates very low for the foreseeable future, at least for a year or more. Most countries are forced to promote fiscal policies that encourage growth to prevent the output losses from becoming permanent and to avoid the death spiral of their economies. The limitation in borrowing of some economies will have an impact on the timing of the recovery and become the key driver between advanced and emerging economies. Developed economies will be able to borrow at incredibly low interest rates, while developing countries have less capacity to use fiscal policies to begin the recovery process.

 

We can safely state, based on 101  FX, the following: 

  • Macroeconomic statistics, such as inflation, have the greatest impact on forex markets.
  • Stock, bond, commodity, and other capital markets also have a strong influence on exchange rates.
  • International trade numbers, such as trade deficits and surpluses, play a vital role in forex markets.
  • Political news can also be important for forex traders, especially when unexpected outcomes occur.
  • Central bank interest rates and intervention are very impactful.
  • Fear, greed and news  can turn a falling instrument into an all-out panic and greed can turn a rising market into a blind-buying spree. 

 

In the face of uncertainty with a new US presidency, global turmoil, aggressive economic actions and their future impact, and a hyperinflated stock market, we should keep our plans and focus short term and be ready to take advantage of opportunities whenever we can in this volatile environment.

 

With all this in mind, success will smile to those who dare and never forget to:

  • Tame the greed, respect the unknown and have effective risk management practices.
  • Learn from their mistakes.
  • Have a love for capital markets and a competitive will to win
  • Be humble, committed and disciplined.
  • Be prepared, planful and patient.
  • Treat trading like a business, paying attention to the execution and keeping the emotions in check.
  • Committed to accept and manage stress and anxiety
  • Know yourself, your trading style and keep your ego and pride in check.
  • Trade with a professional behavior and maturity.
  • Trade with a non subjective criteria approach.
  •  Focus on execution, not wins and losses.Don't think money.
  • Understand the real meaning of the game... Appreciation & Depreciation
  • Accept that this is a game of statistics. You will win and lose.

 Let's make 2021 a year we can never forget. Success smiles to those who dare. Rock on!

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