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What Is a Petrodollar and How Does It Affect the Global Economy?What Is a Petrodollar and How Does It Affect the Global Economy? The concept of petrodollars is an insightful topic to study. The petrodollar isn’t a specific currency but a financial system that reflects economic and political forces that have shaped international relations for decades. This concept is critical to understanding global trade dynamics and geopolitical strategies. Petrodollar: Definition and Origins A petrodollar refers to the US dollars earned by oil-exporting countries through the sale of oil to other nations. The term gained fame in the 1970s, a period marked by significant changes in the global economic landscape, particularly concerning energy resources and currency stability. Historical Context The petrodollar system received a significant boost in development as a result of economic necessity and geopolitical strategy during the turbulent 1970s. Key historical events, such as the collapse of the Bretton Woods system, the 1973 oil crisis, and the US–Saudi agreement, set the stage for the creation of the term ‘petrodollar’. These events emphasised the importance of securing stable economic fundamentals in the face of global uncertainty. Bretton Woods Agreement The Bretton Woods Agreement, established in 1944, created a system of fixed exchange rates anchored by the US dollar, which was convertible to gold. This system fostered post-war economic stability. The Bretton Woods Agreement led to the formation of the World Bank and the International Monetary Fund. The system eventually collapsed in 1971 when President Richard M. Nixon ended the dollar’s convertibility to gold. This collapse left the global economy searching for a new anchor. 1973 Oil Crisis In 1973, the Organisation of Arab Petroleum Exporting Countries (OAPEC) declared an oil embargo against the US and other Western countries that supported Israel during the Yom Kippur War. The embargo prohibited oil exports to target countries and led to a reduction in oil production. The immediate impact was a sharp increase in oil prices. This crisis underscored the strategic importance of oil and prompted economic shifts. US–Saudi Agreement On 8th June 1974, Saudi Arabia entered into an agreement with the United States to accept dollars as the sole payment currency for its oil in exchange for the countries’ bilateral cooperation and US military support to the Saudi regime. This so-called ‘petrodollar agreement’ virtually pegged the value of the US dollar to global oil demand and ensured its continued dominance as the world’s main reserve currency. Mechanisms of the Petrodollar System The petrodollar system refers to the practice of trading oil in US dollars, as well as the broader arrangements that support it. Let’s see how it is manifested. Oil Purchases Global oil sales are predominantly in US dollars, regardless of the buyer or seller’s country. This practice means that countries buying oil must hold dollar reserves, which creates a constant global demand for dollars. This supports the currency’s value and gives the US significant influence over global financial markets. As a benefit, uniformity reduces currency risk and transaction costs. Oil Sales The settlement of oil transactions involves the transfer of dollars through international banking systems, although US banks are the most predominant. The US can exert economic pressure by restricting access to the dollar financial system, effectively imposing sanctions on countries. Recycling of Petrodollars Petrodollar “recycling” refers to the way oil-exporting countries utilise their oil revenue. These countries spend part of their oil revenues on foreign goods and services and save another portion as foreign assets. These assets can include deposits in foreign banks, bonds, and private equity investments. Ultimately, the foreign exchange earned by oil exporters from increased oil exports flows back into the global economy, hence the term “recycled.” Economic and Political Implications The petrodollar system has profound implications for the global economy and geopolitics. Global Trade and Geopolitics The petrodollar system standardises oil pricing, simplifies transactions, and reduces exchange rate risks for oil-importing countries, thereby facilitating smoother international trade flows. The petrodollar system cemented the relationship between the United States and Saudi Arabia, along with other oil-producing nations, forming a strategic alliance that would influence global politics for decades. Oil-Exporting Countries Oil-exporting countries reinvest revenues into exploration, drilling, and infrastructure projects, boosting oil production and driving technological advancements. Additionally, petrodollars allow oil-exporting nations to invest in the domestic economy and stimulate domestic growth. US Economic Influence The petrodollar system increased global demand for the dollar, solidifying its status as the world’s primary reserve currency. Oil-exporting countries holding large reserves of US dollars invest them in US government securities, which support the US economy. The demand for US dollars maintains a favourable trade balance for the United States. Oil transactions increasing the global circulation of dollars support US exports. High dollar demand ensures ample liquidity in the forex market, making it the most widely traded currency. If you are interested in trading currencies such as the US dollar, explore popular USD pairs on the TickTrader platform. Criticisms and Challenges While the petrodollar provides economic and geopolitical advantages, it also exposes countries to a number of risks and challenges. Economic Disparities Critics argue that the petrodollar exacerbates global economic inequality. By concentrating economic power and benefits in the hands of a limited group of oil-exporting countries, it perpetuates inequality and prevents more equitable economic development. This concentration of wealth and influence often puts poorer countries at a disadvantage, as they find it difficult to compete on a world stage dominated by petrodollar transactions. Dependency and Vulnerability The petrodollar system also creates dependencies: 1. Oil-importing countries must maintain dollar reserves, potentially exposing their economies to changes in the USD rate. 2. Oil-exporting countries invest heavily in the US economy and financial instruments, making them vulnerable to economic fluctuations and potential restrictions by the US, such as sanctions. 3. The US economy profits from the capital inflows, as they help finance the federal budget and support economic growth. Reduced inflows may negatively impact the US economy. 4. Changes in geopolitical alliances, regional conflicts, and economic policies can impact the stability and future of the petrodollar system. The collapse of the petrodollar could have serious consequences for the US and global economy. Future of the Petrodollar The future of this system is uncertain, especially with the changing geopolitical landscape. Saudi Arabia has opted to terminate the 50-year petrodollar agreement with the US, and it expired on June 9, 2024, which was referred to as the end of the petrodollar in the news. This agreement has been the cornerstone of the petrodollar system, and its expiration marks a significant shift. It means that oil will be traded in multiple currencies, including the Chinese yuan, euro, yen, and potentially digital currencies like Bitcoin. These efforts reflect a growing desire to reduce dependency on the dollar and diversify economic risks. These changes may contribute to a more balanced global economic environment by weakening the influence of the dollar, creating a more multipolar currency system, and providing countries with greater financial autonomy. Another threat to the oil-US dollar system is that countries seek sustainable energy alternatives and new economic alliances emerge. In particular, the shift to renewable energy could reduce the world’s dependence on oil, thereby decreasing the centrality of the traditional energy system and the US dollar, causing a reassessment of the existing order. Final Thoughts The petrodollar, born out of historical necessity and strategic agreements, may no longer be a cornerstone of economics and geopolitics. As global energy and financial systems evolve, the role of the petrodollar has become the subject of critical analysis and debate, and the recent termination of the US–Saudi agreement is a prime example of the changing economic and geopolitical landscape. Changes may lead to revaluation of various currencies and market volatility. Those who are interested in catching market volatility and trading on news events, can open an FXOpen account and start trading various USD pairs. FAQ What Is the Petrodollar? The petrodollar is the name of the system that reflects US dollars earned by a country through the sale of its petroleum to other countries. This term highlights the relationship between global oil sales and the US dollar. When Was the Petrodollar Created? The petrodollar concept was created in the mid-1970s. The turning point came in 1974 when the United States and Saudi Arabia reached an agreement that oil prices would be set exclusively in US dollars. This agreement followed the collapse of the Bretton Woods System and the 1973 oil crisis. Why Is Oil Only Traded in Dollars? Currently, oil is not only traded in dollars. Some oil-exporting countries use their national currencies, and the euro and Chinese yuan may be widely used for oil trading in the near future. Oil was traded in dollars mainly because of the 1974 US-Saudi agreement. It created a standard currency for oil transactions and reduced exchange rate risks. But since the agreement was terminated in June 2024, other currencies may become more common in oil transactions. Is the US Dollar Backed by Oil? No, the US dollar is not backed by oil. Since the end of the Bretton Woods System in 1971, no physical commodity has backed the dollar. However, the petrodollar system creates a close link between the dollar and the global oil trade, maintaining the value of the dollar through constant demand for it in international markets. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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How to Optimize Your Investments and Navigate Economic Seasons The economy operates in recurring phases of expansion and contraction, known as business cycles or economic cycles. These cycles play a fundamental role in shaping economic activity, employment, and investment decisions. In this article, we will explore the different phases of the business cycle, relate them to the seasons of the year, and discuss how investors and businesses can navigate these cycles effectively. 🔵𝚆𝙷𝙰𝚃 𝙸𝚂 𝙰 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴? A business cycle refers to the fluctuation of economic activity over a period, encompassing periods of growth and decline. It is measured through changes in key economic indicators such as GDP (Gross Domestic Product), employment, consumer spending, and industrial production. Business cycles typically follow a regular pattern, starting with a phase of expansion, followed by a peak, a period of contraction or recession, and eventually a trough, after which the economy recovers and the cycle begins anew. 🔵𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙰𝙽𝙳 𝚃𝙷𝙴 𝚂𝙴𝙰𝚂𝙾𝙽𝚂 𝙾𝙵 𝚃𝙷𝙴 𝚈𝙴𝙰𝚁 Each phase of the business cycle can be compared to a season of the year, which provides a helpful way to visualize the economic conditions at play: Spring (Recovery) : After the trough (winter), the economy enters a phase of recovery. Like spring, it's a time of renewal, with growth resuming and businesses beginning to thrive again. Employment rises, consumer confidence improves, and investment increases. Summer (Expansion) : The economy reaches its full strength during the expansion phase. Just like summer brings warmth and energy, this phase brings rising consumer confidence, employment, and production. Companies grow, and investments yield high returns. Autumn (Weakening) : As the cycle peaks, the economy starts showing signs of weakening, much like the cooling of autumn. Consumer spending and business growth slow down, and inflation may rise. The peak signals that the economy is at its maximum potential, and a slowdown or contraction may follow. Winter (Contraction or Recession) : In winter, the economy enters a recession, characterized by declining economic activity, falling production, and rising unemployment. Just as winter halts nature’s growth, a recession slows down economic growth. This is the time when businesses may suffer losses, and consumer confidence weakens. 🔵𝙸𝙼𝙿𝙰𝙲𝚃 𝙾𝙵 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙾𝙽 𝙳𝙸𝙵𝙵𝙴𝚁𝙴𝙽𝚃 𝚂𝙴𝙲𝚃𝙾𝚁𝚂 Business cycles affect various sectors of the economy differently. Some sectors, like consumer discretionary and industrials, tend to perform well during expansions but suffer during recessions. Others, such as utilities and consumer staples, may be more resilient during downturns, as they provide essential goods and services. For example: Technology and Manufacturing : These sectors are highly sensitive to business cycles and tend to flourish during periods of expansion due to increased consumer and business spending. Healthcare and Utilities : These sectors often remain stable during recessions because demand for healthcare and essential services remains constant. Crypto Sector: SP500: 🔵𝙽𝙰𝚅𝙸𝙶𝙰𝚃𝙸𝙽𝙶 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙰𝚂 𝙰𝙽 𝙸𝙽𝚅𝙴𝚂𝚃𝙾𝚁 Investors can use knowledge of the business cycle to adjust their portfolios. During expansion phases, growth stocks and cyclical industries may offer better returns. Risk-On vs. Risk-Off Investing in Different Business Cycle Phases During periods of economic expansion (summer), the environment is often referred to as "risk-on." Investors are more willing to take risks because economic growth drives higher returns on riskier assets, such as equities, growth stocks, or emerging markets. As consumer confidence, business spending, and investments increase, the potential rewards from higher-risk investments become more appealing. Example of risk-on and off of cryptocurrency Example of risk-on and off of Stock Market However, during periods of economic contraction or recession (winter), investors typically shift to a "risk-off" strategy. In this phase, they seek to protect their capital by moving away from high-risk assets and toward lower-risk investments like government bonds, blue-chip stocks, or cash. The focus shifts to preserving wealth, and risk-taking is minimized or eliminated. Investors may use leading and lagging indicators to anticipate where the economy is headed. Leading indicators, such as stock market performance or consumer confidence, tend to signal changes before the economy as a whole moves. Lagging indicators, like unemployment or corporate profits, confirm trends after they occur. 🔵𝙶𝙾𝚅𝙴𝚁𝙽𝙼𝙴𝙽𝚃 𝙿𝙾𝙻𝙸𝙲𝙸𝙴𝚂 𝙰𝙽𝙳 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 Governments often intervene to smooth out the extremes of business cycles through fiscal and monetary policy. During recessions, governments may implement stimulus packages, cut taxes, or increase spending to boost demand. Central banks may lower interest rates to encourage borrowing and investment. Conversely, during periods of rapid expansion and inflationary pressure, governments may raise taxes or cut spending, while central banks might increase interest rates to prevent the economy from overheating. 🔵𝙲𝙾𝙽𝙲𝙻𝚄𝚂𝙸𝙾𝙽 Business cycles are a natural part of economic activity, influencing everything from consumer spending to corporate profitability and investment strategies. By understanding the phases of the business cycle (or seasons of the economy) and their impact on various sectors, investors and businesses can better position themselves to navigate economic fluctuations. Whether the economy is expanding or contracting, being aware of the current phase of the business cycle helps guide decisions, manage risks, and seize opportunities.

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Understanding Initial Jobless Claims as a Market Indicator Introduction In the complex and multifaceted world of economic indicators, initial jobless claims hold a special place. As a measure of the number of individuals filing for unemployment benefits for the first time, this statistic offers a real-time glimpse into the health of the labor market, which in turn is a vital component of the overall economic landscape. This article delves into how initial jobless claims function as an indicator and their impact on the financial markets. Understanding Initial Jobless Claims Initial jobless claims refer to claims filed by individuals seeking to receive unemployment benefits after losing their job. These are reported weekly by the U.S. Department of Labor, providing a timely snapshot of labor market conditions. A lower number of claims typically signifies a strong job market, suggesting that fewer people are losing their jobs. Conversely, an increase in claims can indicate a weakening labor market, often a precursor to broader economic downturns. Initial Jobless Claims as an Economic Indicator Health of the Labor Market: The primary significance of initial jobless claims is its reflection of the labor market's health. A steady, low number of claims often correlates with job growth and declining unemployment rates, indicating a robust economy. Leading Indicator for the Economy: As a leading economic indicator, jobless claims can provide early signals about the direction of the economy. Spikes in claims can forewarn of economic contraction, while consistent decreases might indicate economic expansion. Consumer Spending: Since employment directly affects consumer income, initial jobless claims can also indirectly signal changes in consumer spending, a major driver of economic growth. Impact on Financial Markets Market Sentiment: Traders and investors closely watch initial jobless claims to gauge market sentiment. Fluctuations in these numbers can lead to immediate reactions in the stock, bond, and forex markets. Monetary Policy Implications: Central banks, like the Federal Reserve, consider labor market conditions when setting monetary policy. Rising jobless claims can lead to a more dovish policy stance (like lowering interest rates), while decreasing claims might justify tightening policies. Sector-Specific Implications: Certain sectors are more sensitive to changes in jobless claims. For instance, a rise in claims can negatively impact consumer discretionary stocks but might be favorable for defensive sectors like utilities or healthcare. Analyzing the Data Understanding initial jobless claims requires context. Seasonal factors, temporary layoffs, and unique economic events (like a pandemic) can skew data. Analysts often look at the four-week moving average to smooth out weekly volatilities for a clearer trend. Conclusion In conclusion, initial jobless claims serve as a crucial barometer for the economy and financial markets. Investors, policy makers, and economists alike monitor these figures for insights into labor market trends and the broader economic picture. As with any indicator, it's essential to consider jobless claims in conjunction with other data to fully understand the economic landscape.

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Economic Lessons From 2023 We entered 2023 with a pessimistic consensus outlook for U.S. economic performance and for how rapidly inflation might recede. As it happened, there was no recession, and personal consumption posted sustained strength. Inflation, except shelter, declined dramatically from its 2022 peak. The big economic driver in 2023 was job growth. Jobs had recovered all their pandemic losses by mid-2022 and continued to post strong growth in 2023, partly due to many people returning to the labor force. When the economy is adding jobs, people are willing to spend money. The key for real GDP in 2023 was the strong job growth that led to robust personal consumption spending. For 2024, labor force growth and job growth are anticipated by many to slow down from the unexpectedly strong pace of 2023, leading to slower real GDP growth in 2024. And there is still plenty of debate about whether a slowdown in 2024 could turn into a recession. Followers of the inverted yield curve will point out that it was only in Q4 2023 that the yield curve decisively inverted (meaning short-term rates are higher than long-term yields). It is often cited that it takes 12 to 18 months after a yield curve inversion for a recession to commence. Using that math, Q2 2024 would be the time for economic weakness to appear based on this theory. Only time will tell. The rapid pace of inflation receding in the first half of 2023 was a very pleasant surprise. Indeed, inflation is coming under control by virtually every measure except one: shelter. The calculation of shelter inflation is highly controversial for its use of owners’ equivalent rent, which assumes the homeowner rents his house to himself and receives the income. This is an economic fiction that many argue dramatically distorts headline CPI, given that owners’ equivalent rent is 25% of the price index. Once one removes owners’ equivalent rent from the inflation calculation, inflation is only 2%, and one can better appreciate why the Federal Reserve has chosen to pause its rate hikes, even as it keeps its options open to raise rates if inflation were to unexpectedly rise again. The bottom line is that monetary policy reached a restrictive stance in late 2022 and was tightened a little more in 2023. For a data dependent Fed, inflation and jobs data for 2024 will guide us as to what might happen next. Good numbers on inflation or a recession might mean rate cuts. Otherwise, the Fed might just keep rates higher for longer. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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Understanding GDP Growth: A Key Indicator of Economic Health Introduction Gross Domestic Product (GDP) growth is a crucial economic indicator that provides insight into the overall health and performance of a country's economy. As a comprehensive measure of a nation's economic activity, GDP growth reflects the value of all goods and services produced within a country over a specific period. In this article, we will explore the significance of GDP growth, its components, and the impact it has on various aspects of a nation's well-being. Definition and Components of GDP GDP is the total value of all goods and services produced within a country's borders in a given time frame. It is commonly calculated quarterly and annually. There are three main ways to measure GDP: the production approach, the income approach, and the expenditure approach. Each approach provides a unique perspective on economic activity. Production Approach: This method calculates GDP by adding up all the value-added at each stage of production. It includes the value of intermediate goods and services to avoid double counting. Income Approach: GDP can also be measured by summing up all the incomes earned by individuals and businesses within a country, including wages, profits, and taxes minus subsidies. Expenditure Approach: This approach calculates GDP by summing up all the expenditures made in the economy. It includes consumption, investment, government spending, and net exports (exports minus imports). Importance Here are some of the primary reasons why GDP growth is considered important: Economic Health - GDP growth is a fundamental measure of a country's economic health. A positive growth rate indicates that the economy is expanding, producing more goods and services over time. This growth is essential for creating jobs, increasing incomes, and improving overall living standards. Job Creation - A growing economy often leads to increased employment opportunities. As businesses expand to meet rising demand for goods and services, they hire more workers, reducing unemployment rates and contributing to a more robust labor market. Income Generation - GDP growth is linked to the overall income generated within a country. As the economy expands, incomes generally rise, providing individuals and households with more financial resources. This, in turn, contributes to an improvement in the standard of living. Investment Climate - Investors and businesses often use GDP growth as a critical factor in assessing the attractiveness of a country for investment. A growing economy suggests potential opportunities for businesses to thrive, encouraging both domestic and foreign investments. Government Policy - Policymakers use GDP growth data to formulate economic policies. High GDP growth rates may lead to expansionary policies aimed at sustaining economic momentum, while low or negative growth rates may prompt policymakers to adopt measures to stimulate economic activity. Consumer and Business Confidence - Positive GDP growth contributes to increased confidence among consumers and businesses. When people perceive a growing economy, they are more likely to spend money, and businesses are more inclined to invest and expand. International Competitiveness - A country with a strong and growing economy is often viewed as more competitive on the global stage. A robust GDP growth rate enhances a nation's economic influence and can attract international trade and investment. Government Revenues - Higher GDP growth rates can lead to increased tax revenues for the government. This additional income can be used to fund public services, infrastructure projects, and social programs, contributing to the overall development of the nation. Debt Management - Economic growth can help manage a country's debt burden. A growing economy typically generates more revenue, making it easier for the government to service its debt without relying excessively on borrowing. Poverty Reduction - Sustainable GDP growth is often associated with poverty reduction. As the economy expands, opportunities for employment and income generation increase, helping to lift people out of poverty. Conclusion In conclusion, Gross Domestic Product (GDP) growth stands as a cornerstone in understanding and evaluating a nation's economic well-being. Through its comprehensive measurement of all goods and services produced within a country, GDP growth provides valuable insights into economic health, job creation, income generation, and various other facets that collectively contribute to the overall prosperity of a nation. The three approaches to measuring GDP—production, income, and expenditure—offer distinct perspectives, ensuring a holistic understanding of economic activity. The importance of GDP growth cannot be overstated, as it serves as a fundamental gauge of a country's economic trajectory and influences crucial decision-making processes at both the individual and policy levels. The positive correlation between GDP growth and job creation underscores the role of a thriving economy in fostering employment opportunities and contributing to a robust labor market. Additionally, the impact on income generation translates into an improved standard of living for individuals and households, reflecting the tangible benefits of economic expansion. Investors and businesses keenly observe GDP growth as a key indicator when evaluating the potential for investment. Government policymakers, armed with GDP data, craft strategies to either sustain economic momentum or stimulate activity, underscoring the pivotal role GDP growth plays in shaping economic policies. The ripple effects of GDP growth extend to consumer and business confidence, international competitiveness, government revenues, and effective debt management. A growing economy not only instills confidence but also attracts global trade and investment, positioning the nation favorably on the international stage. Perhaps most importantly, sustainable GDP growth is intricately linked to poverty reduction. As the economy expands, opportunities for employment and income generation increase, contributing to the uplifting of individuals and communities from poverty. In essence, the study of GDP growth goes beyond mere economic statistics; it serves as a compass guiding nations towards prosperity, inclusive development, and an improved quality of life for their citizens. Recognizing the multi-dimensional impact of GDP growth enables policymakers, businesses, and individuals to make informed decisions that foster long-term economic well-being and societal advancement.

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by financialflagship

Economy: A Social Science Shaped by Human Behavior and History The world of Forex trading, with its ever-fluctuating currency exchange rates and intricate financial instruments, may seem like a realm dominated by numbers, charts, and algorithms. However, beneath the surface, the Forex market is a vivid testament to the intricate relationship between economics and social behavior. In this idea, we will explore how the economy is a social science at its core, and how historical events have consistently reshaped and influenced economic dynamics. Economics as a Social Science At its essence, economics is not just about money; it studies how societies allocate their limited resources to satisfy their various wants and needs. The behaviors, decisions, and interactions of individuals, groups, and nations inherently influence this process. Economics is, therefore, a social science, as it explores the dynamics of human behavior and the collective choices we make. Historical events, such as wars, pandemics, and technological advancements, have consistently demonstrated the profound impact of social behavior on the economy. Let's delve into some examples to understand this connection better. World Wars and Economic Transformation The two World Wars of the 20th century provide an excellent illustration of how historical events can shape the economy. These catastrophic conflicts forced nations to mobilize their resources and allocate them to the war effort. The result was significant shifts in economic priorities, with governments heavily investing in military production and infrastructure. These investments not only led to economic growth but also spurred technological innovation, such as radar and nuclear energy. Furthermore, the post-war period witnessed the creation of international economic institutions like the Bretton Woods system, which set the stage for a more interconnected global economy. The forex market played a pivotal role in this period by facilitating international trade and currency exchange, reflecting the evolving economic landscape. The 2008 Financial Crisis and Behavioral Economics The 2008 financial crisis, driven by the bursting of the housing bubble and reckless lending practices, revealed the profound impact of human psychology and behavior on financial markets. Behavioral economics, a subfield of economics, studies how psychological biases and cognitive errors influence decision-making. During the crisis, fear, panic, and herd behavior contributed to market volatility, massive losses, and a global recession. Understanding these behavioral aspects is essential for forex traders, as they need to navigate the market's emotional swings and avoid succumbing to the irrational exuberance or fear that can drive price movements. Technological Advances and Financial Innovation The emergence of the internet and electronic trading platforms has revolutionized the forex market, making it more accessible to individual traders worldwide. This technological shift highlights the ongoing impact of social behavior on financial markets. As more people participate in online trading, the collective decisions and sentiments of traders, often amplified through social media, can sway exchange rates in real-time. In summary, the Forex market is not just a financial platform but a reflection of the intricate relationship between economics as a social science and human behavior. Historical events have repeatedly demonstrated how social behavior shapes economic outcomes, whether through the impact of wars, financial crises, or technological advances. To succeed in the Forex market, traders must understand and adapt to the ever-changing landscape influenced by the behaviors and choices of societies, governments, and individuals. Do nothing.

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by donothing_lab

Central-Bank-Digital-Currencies Hello, Welcome to this analysis about Central-Bank-Digital-Currencies in which I will explore the ongoing process by central banks to generate Digital-Currencies that replicate the individual Fiat-Currency, its characteristics, its possible manifestations, and its differences to the classical cryptocurrencies we all know as Bitcoin or Ethereum created in the beginning. Since Cryptocurrency was invented by the esteemed Satoshi Nakamoto publishing the open-source white-paper about Bitcoin as a completely decentralized Peer-To-Peer Digital-Currency which supply is limited and is generated through mining and the Proof-Of-Work concept many other decentralized cryptocurrencies emerged such as Ethereum or Litecoin that approved a secure and stable way of payment solutions operating within the determined blockchains. This completely new form of currency and the digital interface was watched by critics as well as supporters and a hype created with cryptocurrency enthusiasts accelerating the innovation process in cryptocurrency. On the other side, banks and governments watched the Cryptocurrency development not always with a non-critical eye, and especially in this process central banks took a greater study into the technology and the idea came into the foreground for digital currencies held and issued by the central banks that should replicate the real fiat-money which is printed by the central banks and distributed through commercial banks. The digital currencies that should be issued by the central banks became the name CBDC (Central-Bank-Digital-Currency) and today many countries' central banks started to work on pilot projects and prototypes to launch the digital replicate of fiat money, in some countries they are already launched and implemented in the economy. __ - Comparing The Classical Concept Of Cryptocurrency To The Central Bank Concept Of Digital-Currency The main characteristics of the classical cryptocurrency like invented in 2009 are that it is decentralized and that its supply is limited while the bitcoins are generated through the mining process there can be no more than 21 Million Bitcoins at all that defines the value of Bitcoin as miners need to improve the technological alignments to rightly mine the Bitcoins and come up with a mining-revenue to keep the process ongoing. On the other side, there is fiat money which is printed in the central bank printing press and which supply can be multiplied by will especially in times of crisis as it was in the last year the money supply increased exponentially by the central banks, this has an inflationary character and comes up with many other issues as in times of crisis the central banks need to print always more and more money as before. Now the fiat money printed by the central banks is issued to commercial banks with zero interests at this time and from there is supplied to the merchants and persons who taking up credits and which account money is held in a bank account as a "digital back-up" by the printed fiat money, the tendency with this bank account money is also to be multiplied by the banks and moved around in the system to be taken for credits so that one holds money in an account while it is used for the other individual's credit. Now as the central banks working on the digital currencies to substitute the fiat money in circulation the biggest difference is that its supply is not limited like it is in Bitcoin or many other cryptocurrencies, as the central bank fiat money can be printed further this is also the case with the upcoming central-bank-digital-currencies. Besides that the central-bank-digital-currencies are not decentral because they are issued by a central authority like the central bank, the system on which the CBDC is settled can be decentral however on a broader scale it is still centralized by the individual central bank, there is still a difference if the CBDC model is indirect, direct or hybrid nevertheless it is always centralized as the intern blockchain is created by the certain central bank. Another factor is also privacy as the public Bitcoin blockchain does not store any private user information, depending on the model with a CBDC this can be very different as there is indeed the possibility that private user information is stored in the blockchain by the central bank. Taking all these assumptions into consideration it comes to the conclusion that CBDCs aren't the same as the classical cryptocurrencies in common sense, it is rather a system that replaces the fiat money with digital money and gives the central bank much better opportunities to handle, store and track it with a faster network and potential storage of data. __ - Examining Models On How Central-Bank-Digital-Currencies Can Function With the gained assumptions it is important to note that there are different type models under which CBDCs can operate. Every model has its own characteristics and handles money circulation in an altered cycle. Besides that, the different models can have very different effects on the economy and especially on sectors like the banking industry or payment solution providers. Furthermore, the types on how payment data and information is stored differ within these models. It is highly necessary to recognize these concepts to assume how the CBDC infrastructure affects the economical landscape. The Indirect CBDC Model Within this model, the central bank keeps track records of wholesale accounts by the commercial bank as an intermediary between the central bank and the persons or merchants. The consumer as the person or merchant has a claim with the intermediary as the commercial bank and handles payments with the commercial bank. In this case, the intermediary handles all the communication with the consumer as retail clients and its net payment information, sending payment messages and storing the data. It would be a similar model to the actual credit distribution that exists with credits given by the central banks to commercial banks and from these distributed to the persons or merchants. The Direct CBDC Model The Direct CBDC Model functions differently from the Indirect one as the payments are handled directly between the central banks and the persons or merchants, in this case, receives, stores, and processes the information given by the consumer. This model is much more functional and practicable for the central bank as the commercial banks as intermediaries aren't necessary for the gateway. A full-scale implementation of this model will cause a higher decrease in commercial banks at all of which the sector already struggles, the model would further this process. The model would also set the central bank as the central authority handling all the payment relevant mechanisms with the consumer as persons or merchants. The Hybrid CBDC Model In this model the Persons or Merchants have a direct claim on the CBDC with the central bank while an intermediary, in this case, a PSP (Payment-Service-Provider) keeps track of the payments information and handles direct payments, the PSP in this case does not need to be a bank essentially. It is also integrated within that when technical issues come up with failures in the system that the central bank can handle direct payments with the consumers and restore retail balances. This system offers more flexibility at the cost of a more complex infrastructure to operate for the central bank. Besides that, it has a similar negative effect on the banks like the direct model as banks arent necessarily needed for the payment communication. __ It is not unlikely that the development of Central-Bank-Digital-Currencies will keep going within the upcoming times, therefore it is necessary to elevate how these diverging models can affect the actual economy. As many countries moving on with the projects and prosecution of CBDCs these will be realized in a more fulfilled way with a high possibility and it will be an important question on central banks will govern these CBDCs as they aren't decentralized like the cryptocurrency roots they can not be held as a direct comparison to these and are indeed a fiat money replication in digital terms, it will definitely open new doors for the central-banks money policy however what it has for effects on consumers as peoples or merchants is a serious examination. Thank you, for watching, it was important for me to scrutinize the significance of Central-Bank-Digital-Currencies and elevate a perception to this omnipresent topic. In this manner what do you have for an opinion of Central-Bank-Digital-Currencies implementation? Let us know in the comments below. Information provided is only educational and should not be used to take action in the markets.

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U.S. Economy Less Interest Rate Sensitive Despite the fastest rise in interest rates since 1981, and an inverted yield curve where short-term rates are much higher than long-term bond yields, the United States has not (at least yet) experienced the recession forecast by the vast majority of market pundits and economists. Why not? The relatively few contrarians that did not forecast a recession, including myself, had many reasons for a more optimistic view. However, the most critical reason appears to have been an appreciation of how the U.S. economy has changed over decades and become much less sensitive to interest rates. In the 1950s, 1960s and 1970s, the U.S. economy was driven by housing and manufacturing. The only choice to finance a home was the 30-year fixed rate mortgage, provided by a savings and loan institution, that deliberately borrowed short-term from savers and lent long-term, taking considerable interest rate and yield curve risk. Further, there was no such thing as financial futures or interest rate swaps to allow for the efficient hedging of interest rate risk. Fast forward to the modern economy of the 2020s. The U.S. is an economy driven by the service sector, and services are considerably less sensitive to interest rate swings than housing and automobiles. Home mortgages come in every size and flavor, from floating rates to fixed rates. Mortgages are originated by specialists and then packaged and sold to pensions, endowments and investors willing to take the risk. There are no savings and loan institutions. Financial futures, swaps and options are available for efficient hedging and management of interest rate risk. In short, the U.S. economy does not dance to interest rates like it once did. Make no mistake, though; interest rate shifts have a profound impact on asset values, from equities to bonds, to housing. It is just that the impact on the real economy is much more subdued than it once was, and a rise in rates does not automatically mean a recession is around the corner. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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Deciphering Divergent Signals The Complex Economic Landscape The global economy continues to face profound uncertainties in the wake of COVID-19's massive disruptions. For policymakers and business leaders, making sense of divergent signals on jobs, inflation, and growth remains imperative yet challenging. In the United States, inflation pressures appear to be moderately easing after surging to 40-year highs in 2022. The annual Consumer Price Index (CPI) declined to 3% in June from the prior peak of 9.1%. Plunging gasoline and used car prices provided some consumer relief, while housing and food costs remained worryingly elevated. Core CPI, excluding food and energy, dipped to 4.8% but persists well above the Fed’s 2% target. Supply chain improvements, waning pandemic demand spikes, and the strong dollar making imports cheaper all helped cool inflation. However, risks abound that high prices become entrenched with tight labor markets still buoying wages. Major central banks responded with substantial interest rate hikes to reduce demand, but the full economic drag likely remains unseen. Further supply shocks from geopolitics or weather could also reignite commodity inflation. While the direction seems promising, the Fed vows ongoing vigilance and further tightening until inflation durably falls to acceptable levels. The path back to price stability will be bumpy. Yet even amidst surging inflation, the US labor market showed resilience through 2022. Employers added over 4 million jobs, driving unemployment down to 3.5%, matching pre-pandemic lows. This simultaneous inflation and job growth confounds historical norms where Fed tightening swiftly slows hiring. Pandemic-era stimulus and savings initially cushioned households from rate hikes, sustaining consumer demand. Early retirements, long COVID disabilities, caregiving needs, and possibly a cultural rethinking of work also constricted labor supply. With fewer jobseekers available, businesses retained and attracted talent by lifting pay, leading to nominal wage growth even outpacing inflation for some months. However, the labor market's anomalous buoyancy shows growing fragility. Job openings plunged over 20% since March, tech and housing layoffs multiplied, and wage growth decelerated – all signals of softening demand as higher rates bite. Most economists expect outright job losses in coming months as the Fed induces a deliberate recession to conquer inflation. Outside the US, other economies show similar labor market resilience assisted by generous pandemic supports. But with emergency stimulus now depleted, Europe especially looks vulnerable. Energy and food inflation strain household budgets as rising rates threaten economies already flirting with recession. Surveys show consumer confidence nosediving across European markets. With less policy space, job losses may mount faster overseas if slowdowns worsen. Meanwhile, Mexico’s economy and currency proved surprisingly robust. Peso strength reflects Mexico’s expanding manufacturing exports, especially autos, amid US attempts to nearshore production and diversify from China reliance. Remittances from Mexican immigrants also reached new highs, supporting domestic demand. However, complex immigration issues continue challenging US-Mexico ties. The pandemic undoubtedly accelerated pre-existing workforce transformations. Millions older employees permanently retired. Younger cohorts increasingly spurn traditional career ladders, cobbling together gig work and passion projects. Remote technology facilitated this cultural shift toward customized careers and lifestyle priorities. Many posit these preferences will now permanently reshape labor markets. Employers clinging to old norms of in-office inflexibility may struggle to hire and retain talent, especially younger workers. Tighter immigration restrictions also constrain domestic labor supply. At the same time, automation and artificial intelligence will transform productivity and skills demands. In this context, labor shortages could linger regardless of economic cycles. If realized, productivity enhancements from technology could support growth with fewer workers. But displacement risks require better policies around skills retraining, portable benefits, and income supports. Individuals must continually gain new capabilities to stay relevant. The days of lifelong stable employer relationships appear gone. For policymakers, balancing inflation control and labor health presents acute challenges. Achieving a soft landing that curtails price spikes without triggering mass unemployment hardly looks guaranteed. The Fed’s rapid tightening applies tremendous pressure to an economy still experiencing profound demographic, technological, and cultural realignments. With less room for stimulus, other central banks face even more daunting dilemmas. Premature efforts to rein in inflation could induce deep recessions and lasting scars. But failure to act also risks runaway prices that erode living standards and stability. There are no easy solutions with both scenarios carrying grave consequences. For business leaders, adjusting to emerging realities in workforce priorities and automation capabilities remains imperative. Companies that embrace flexible work options, prioritize pay equity, and intelligently integrate technologies will gain a competitive edge in accessing skills and talent. But transitions will inevitably be turbulent. On the whole, the global economy's trajectory looks cloudy. While the inflation fever appears to be modestly breaking, risks of resurgence remain as long as labor markets show tightness. But just as rising prices moderate, the delayed impacts from massive rate hikes threaten to extinguish job growth and demand. For workers, maintaining adaptability and skills development is mandatory to navigate gathering storms. Any Coming downturn may well play out differently than past recessions due to demographic shifts, cultural evolution, and automation. But with debt levels still stretched thin across sectors, the turbulence could yet prove intense. The path forward promises to be volatile and uneven amidst the lingering pandemic aftershocks. Navigating uncertainty remains imperative but challenging.

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by BitcoinMacro

Inflation vs Innovation Can the Markets Handle the Heat Global markets face contradictory forces in 2023. Inflation still simmers as central banks tighten money supply worldwide. Geopolitical friction continues while economic growth likely slows ahead. Yet technological transformation charges ahead, with artificial intelligence poised for explosive improvements. Investors and policymakers must stay nimble in this uncertain environment. After plunging painfully in 2022, stocks have rebounded with vigor so far this year. This despite raging inflation and the Federal Reserve's hawkish stance on interest rates. Hefty liquidity efforts in China likely buoyed prices. Investors may also have grown too pessimistic amid still-sturdy corporate profits. But sentiment could sour again if supply chain snarls resurface. In bond markets, yields continue reflecting dreary growth expectations after last year's surge. The inverted yield curve especially screams pessimism on the near-term economy. Meanwhile, the Fed's bond portfolio shrinkage has yet to rattle markets. This implies the Fed's quantitative easing and tightening have limited impact on actual money supply, defying popular perception. On inflation, early 2023 figures show it easing from 40-year heights but still well above the Fed's 2% bullseye. The Fed remains leery of declaring victory prematurely. Taming inflation sans triggering severe recession is an epic challenge. Geopolitical wild cards like the Russia-Ukraine war that evade the Fed's grasp will shape the outcome. Amidst these crosscurrents, technological forces advance relentlessly. The frantic digitization around COVID-19 now gives way to even more seismic innovations. The meteoric success of AI like ChatGPT provides a mere glimpse of the transformations coming for healthcare, transportation, customer service and virtually every industry. The promise appears gargantuan, with AI generating solutions and ideas no human could alone conceive. But the warp-speed pace also carries perils if ethics and safeguards fail to keep up. Mass job destruction and wealth hoarding by Big Tech could ensue absent mitigating policies. But wisely harnessed AI also holds potential to uplift living standards globally. For investors, AI has already jet-propelled leaders like Google, Microsoft, Nvidia and Amazon powering this tech revolution. But smaller firms wielding these tools may also see jackpot gains, as costs plunge and new opportunities emerge across sectors. That's why non-US and smaller stocks may provide superior opportunities versus overvalued big US tech. In conclusion, the global economic and financial landscape simmers with familiar threats and novel technological promise. Inflation may moderate but seems unlikely to vanish given lingering supply dysfunction and distortions from massive stimulus. Stocks navigate shifting sentiment amid rising rates and demand doubts. And machine learning progresses rapidly into a future we can now scarcely envision. Nimbly navigating such turbulence requires flexibility, tech savviness and philosophical courage. Responsibly steering AI's development is a herculean challenge, to maximize benefits and minimize pitfalls. Individuals need to stay skilled while advocating protections against job disruption. Policymakers face wrenching tradeoffs between growth, inflation and financial stability - all compounded by geopolitics. Yet within uncertainty lies opportunity for those poised to seize it. The future remains ours to shape, if we summon the wisdom and will to guide technology toward enriching human life rather than eroding it. The road ahead will be arduous but need not be hopeless, if compassion and conscience inform our creations.

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by BitcoinMacro

Guide to Major Economic Events Keeping a watchful eye on major economic events is crucial for investors and traders looking to navigate the dynamic landscape of cryptocurrencies, stocks, and other financial markets. By staying informed about key developments, market participants can make more informed decisions and position themselves strategically. In this article, we will provide an overview of significant economic events that can impact these markets and highlight their potential implications. 1. Economic Events Affecting Stocks : a) Central Bank Decisions : Central bank actions, such as interest rate changes, quantitative easing measures, and forward guidance, have a significant impact on stock markets. Investors should assess the rationale behind central bank decisions, analyze the potential effects on borrowing costs, market liquidity, and investor sentiment. Bullish Conclusion: Interest rate cuts or accommodative monetary policy measures can stimulate economic growth, lower borrowing costs, and potentially drive stock prices higher. Bearish Conclusion: Interest rate hikes or tighter monetary policy measures may indicate a more cautious economic outlook, potentially leading to bearish market reactions. b) Economic Indicators : Economic indicators such as GDP growth rates, inflation data, unemployment rates, and consumer sentiment reports are closely watched by stock market participants. Bullish Conclusion: Positive surprises in economic indicators, such as strong GDP growth, low unemployment rates, and high consumer confidence, can indicate a healthy economy and potentially drive stock prices higher. Bearish Conclusion: Negative surprises in economic indicators, such as weak GDP growth, high inflation, or rising unemployment rates, may signal economic weakness and potentially lead to bearish sentiments in the stock market. c) Corporate Earnings Reports : Corporate earnings reports are a critical driver of stock prices. Investors closely analyze revenue growth, earnings per share (EPS), profit margins, and forward guidance provided by companies. Bullish Conclusion: Strong earnings results, accompanied by positive forward guidance, can support bullish sentiment and drive stock prices higher. Bearish Conclusion: Disappointing earnings reports and pessimistic guidance may lead to bearish market reactions. Economic Events Affecting Cryptocurrencies : a) Regulatory Developments : Cryptocurrencies are heavily influenced by regulatory decisions and developments. Investors should closely monitor regulatory announcements and assess their potential impact on cryptocurrency adoption, trading volumes, and market values. Bullish Conclusion: Favorable regulatory developments, such as clearer guidelines and increased institutional adoption of cryptocurrencies, can generate optimism and potentially boost cryptocurrency prices. Bearish Conclusion: Stricter regulations, bans, or negative regulatory developments in the cryptocurrency sector can create uncertainty and bearish sentiments among investors. b) Technological Advancements : Technological advancements and breakthroughs in the blockchain and cryptocurrency sectors can have a substantial impact on cryptocurrency prices. Bullish Conclusion: Positive technological advancements, such as the integration of blockchain technology into various industries or improvements in scalability and security, can generate positive market sentiments. Bearish Conclusion: Technological setbacks, security vulnerabilities, or lack of progress in the implementation of blockchain solutions may result in bearish reactions in the cryptocurrency market. Economic Events Affecting All Markets : a) Trade and Geopolitical Developments : Trade tensions, international conflicts, and geopolitical events can impact both stock and cryptocurrency markets. Investors should assess the potential consequences of trade negotiations, resolutions, or escalations of conflicts on market sentiment. Bullish Conclusion: Positive trade developments or easing geopolitical tensions can drive bullish sentiments in both stock and cryptocurrency markets. Bearish Conclusion: Trade disputes or geopolitical uncertainties can create bearish market conditions across stocks and cryptocurrencies. b) Natural Disasters and Global Events : Major natural disasters, pandemics, and global events have economic repercussions that can affect both stocks and cryptocurrencies. Investors should evaluate the potential impact of these events onsupply chains, consumer behavior, and investor sentiment. Bullish Conclusion: Swift recoveries from natural disasters or positive developments in response to global events can generate bullish sentiment across stocks and cryptocurrencies. Bearish Conclusion: Economic disruptions caused by natural disasters, pandemics, or global events can lead to bearish market sentiments across both asset classes. Conclusion: Staying informed about major economic events is crucial for investors and traders aiming to navigate the complex world of cryptocurrencies, stocks, and other financial markets. By analyzing the implications of these events, investors can make more informed judgments about potential bullish or bearish market conditions. However, it's important to consider multiple factors and use additional analysis to draw conclusions about market directions. Enjoy!

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Will The U.S Dollar Collapse ?OANDA:XAUUSD Currencies fall for various reasons and they include: 1. Political or economic disorder 2. Hyperinflation 3. War 4. A labor market decline 5. Recession, among various other reasons. 1.The United States has weathered several political and economic disorders since its formation in 1776. The country was on the brink of collapse during the Great Depression in 1929 but successfully weathered the storm in 1939. Not only did it withstand the Great Depression, but it also fought World War II with valor the same year. The will to overcome all odds is in the blood of Americans come hell or high water. Therefore, the US has more chances to overcome political or economic disorder due to this very spirit. 2 Hyperinflation Inflation in the US is high but has not reached hyperinflation yet. The Federal Reserve managed to bring down rates from 8% to 6.5% and are rowing the boat, despite muddy waters. Hyperinflation taking over the country with daily essentials becoming 50 times more expensive might never be a reality. 3. War The US is technically not at war but funds wars overseas, be it Ukraine, Syria, and Yemen, among other countries. A rogue nation attacking the US since 9/11 is nil, and the country is not at war today. The US is more equipped to handle and thwart terrorist attacks today than it was ever before. 4. Labor Market Decline The job markets remain robust despite several leading tech firms firing thousands of employees since 2020. Businesses are thriving, and jobs for small and big-level employees remain open for hire. Though the job markets remain on shaky grounds, it managed to sustain and grow, even in muddy conditions. 5. Recession While talks of a recession are growing louder, a recession has technically not hit the markets yet. Both the stock and cryptocurrency markets are doing favorably well in 2023 and generating decent returns for investors. However, a recession cannot be ruled out, as there’s pressure on the financial markets. Considering all the above points, the US stands in a favorable position with the only recession being its weak point. Moreover, since a recession is yet to arrive (or might not arrive), the weak point can be removed for now. In conclusion, the other sore spots can be worked upon and brought under control in the coming years. So Will The US Dollar Collapse? BRICS is yet to finalize a new currency in the upcoming summit in South Africa. The problem with BRICS nations is that decisions are not made swiftly and quickly due to various factors. Asian countries working with each other is not as easy as said. The factors involve India’s broken relations with China and vice-versa. India and China have always been on the wrong ends, and the bitter political disputes could only make things worse. Technically, the US dollar is backed as the default global reserve currency with billions worth of trades being executed each day. The US dollar has a special status globally and is considered one of the safest currencies. The United States is still the biggest economy in the world with an annual GDP of around $23 trillion. Even if the US falters, it always has and will find a way to remain at the top and be an undisputed global leader. The Great Depression is one big example of how nothing is impossible for Americans to succeed in troubled times.

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Black Swan Event: The Biggest Crypto Market Risk!In today’s article, we will be discussing a risk known as Black Swan Event. Now what is the Black Swan and why it is considered as the most unexpected event in the course of any economic crisis is the greater factor to be discussed. The most unexpected event that has the maximum possibility to occur in the market is called Black Swan, this term was first coined by NYU professor and economist Nassim Nicholas Taleb. The main attributes that shape the possibilities of Black Swan events: Unpredictability Potential Severities Widespread impact According to Taleb: A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. They are impossible to predict due to their extreme rarity, yet have catastrophic consequences, it is important for people to always assume a black swan event is a possibility, whatever it may be, and to try to plan accordingly. Some believe that diversification may offer some protection when a black swan event does occur. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight. Extrapolating, using statistics based on observations of past events is not helpful for predicting black swans, and might even make us more vulnerable to them. The last key aspect of a black swan is that as a historically important event, observers are keen to explain it after the fact and speculate as to how it could have been predicted. Such retrospective speculation, however, does not actually help to predict future black swans as these can be anything from a credit crisis to a war. What is the impact on Institutional markets? We know that somehow, we can use normal factors of prediction and probability over mass numbers of people like the result predicting based on Normal distribution curve, for such things, even the extrapolation method is not working. Hence Black Swan can take the market in any form that is not predefined, that can attack a market with several forms like crashing of prices and regulatory risk of digital exchanges. What are the two different types of Black Swan risk? Black Swan occurs within two types one is the positive impact and another one is a negative impact, now the inability to predict the accurate possibilities is the driving force behind the execution of the Black Swan event. Any clampdown on the trading of cryptocurrencies and other digital money can directly crash the prices of other currencies. The crackdown of Cryptocurrency exchanges by any third parties or other factors can also be counted as the Black Swan effect, many particular exogenous events can be forced to occur like: Inverse Volatility The crackdown of Crypto exchanges Regulatory risk of Crypto exchanges Low liquidity and low trading volume Having said that, 2022 has been the year of the “Black Swan” throughout the world of cryptocurrency. From the fall of LUNA to the insolvency of 3AC, Celsius, FTX and now BlockFi, the market has taken major hits in value and credibility. Each one of these events seemingly was viewed as a once in a lifetime event. To sum up, the Black Swan event is described in the following summarized manner: This event is so rare that it has many unknown possibilities occurring suddenly. Also, the impact is so huge that it can have a catastrophic effect. The hindsight conclusion if the prediction comes as true. Conclusion At last, one could conclude that many events could turn into a Black Swan in crypto trading such as, Network Congestion where everyone is rushing to have Ethereum and it subsequently raises the price of gas. In this case, when Black Swan occurs, the problem increases tenfold times and also this affects the liquidation process and also low-value transfers can simply attack the blockchain system. If you liked it, make sure to support with a like, follow and a comment! Best Regards, CryptoQueens.

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by Crypto_Queens_Official

How to Reduce Inflation in South Africa in 2023! - 5 WAYS!How to Reduce Inflation in South Africa in 2023! - 5 WAYS! I got this excellent question today from someone Which I thought was an important question to answer considering the state of the Country of South Africa. Hi everyone. In SA I always wonder how an ordinary person "employed or not" can contribute to bring positive change to our inflation? A. Here is my answer... As an economist, I can say in theory it is possible to bring positive change to the inflation rates but in reality – with corruption – I’m not sure it’s that easy. Also, it’s the butterfly effect where we need to come together as a community (country) to work towards lowering inflation. So on the one hand, there needs to be less spending unfortunately. Here are a few measures I can think of… #1. Lower non-essential spending. People need to stop spending unnecessarily on products and services and instead start saving more for their future. This will hamper and reduce the impact of inflation. #2: Support your local places! This world is becoming highly globalised not only where the rich get richer but the TOP stores and shops get richer too. As a community, we need to start supporting the local businesses that have great quality products and services to. We need to be more friendly to each other and help spread awareness to the small but great man. This will help stimulate the local economy and bring on more job creation and economic growth. #3: More investments in education Education is key to help bring personal development and skills training. We need to educate our fellow people on business skills, high income skills, programming, AI, machine learning, savings, risk averse investments and encourage more businesses to help grow. #4: Save more to invest more When inflation is high it means people were spending uncontrollably which pushed up demand and lowered supply. Instead, we should encourage more savings in stocks, property, trading, funds, and personal finances to reduce the effects of inflation. Instead of drinking sorrows away, spending on games to bide time – focus on less spending and more saving for the future – reducing the debt levels. #5: Invest in renewable energy Load Shedding is here to stay. And so we need to try to support more renewable energy initiatives that come about. Solar, wind and gas. This will definitely help reduce the cost of energy and curb inflation. As I said, we can only do our part and hope for the best. We are a nation with hope, optimism and trust. But instead of just trusting the government we should also learn to support and trust our local businesses and methods to living a better life. Hope that helps.

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The "So-Called" Psychology of a Market Cycle!Greetings Dear Investors and Traders, today CryptoQueens, an educational post regarding the so-called Psychology of a Market Cycle. When making investment decisions, investors have a wide variety of tools at their disposal. While these tools can form the basis of a sound investment thesis, their effectiveness is limited by one’s emotions. Allowing emotions to dictate decisions is a common mistake made by many investors, yet they may not even realize it. People experience different emotions during these market cycles ranging from fear to greed. Below we will analyze, as well as you will find attached in the chart image the different emotions experienced by investors during market cycles which overwhelms the majority of the traders: Disbelief: This phase happens after the bottom has been hit. There is a sense of disbelief among investors about the rally. They believe just like it happened in the past few months, the markets will fall again. Their fear of making another mistake causes them to miss the optimal window to re-enter the market. Optimism: During this phase, the realization dawns on most of the investors that the rally is real. Investing during this phase if stocks are chosen well can give good returns. Enthusiasm: This is the time when the majority of investors are convinced about the market rally, therefore market demand rise. They believe that now is the time to be fully invested. Some naysayers still don’t believe in the market rally and advise caution. Euphoria: This is the phase where there is irrational exuberance in the markets. Investors share a collective dopamine as they think that they are genius because they made a fortune. It is advisable to stay cautious during this phase. Overconfidence/Greed: Investors continue to increase their positions despite high volatility. If you buy during this phase, you are sure to lose money, whatever you buy. Anxiety: Fear sets in, as losses begin to mount. Investors believe that the dip is taking more time than expected. This is the the moment when people are notified with margin calls due to the recent market fall. Anxiety kicks in. Denial: The herd ignores the market signs as market demand weakens. They believe that since their investments are in great companies, they will bounce back. Panic: Herd mentality takes over and market participants rushes to sell leading to widespread selling even at losses. This is a good time to buy extremely selectively for the long term as it may be very difficult to know even for well-informed investors whether we are in the denial phase, panic phase or capitulation phase. Capitulation: Market Participants accepts their losses and completely exit the market. They are selling close to the bottom of the cycle. Agony/Anger: Steep losses take a psychological factor in many investors and they start to blame the government, or anything correlated, perceiving it as market manipulation. Depression: This is the period when investors believe that their retirement savings are gone and their financial security is affected. They even start blaming themselves for investing. However, markets inevitably starts to recover. Conclusion: As an investor, you need to recognize these signals and never lose sight of the bigger picture. It is like Warren Buffett once mentioned. Be scared when others are greedy and greedy when others are afraid. Therefore, keep an eye on the fundamentals and behavioral factors that influence the market and always remain ahead of the game. Make sure you include this in your trading plan before to take action on it. If you liked it, make sure to support with a like, follow and a comment! Best Regards, CryptoQueens.

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by Crypto_Queens_Official

The Psychology Of A Market Cycle The psychology of a market cycle refers to the emotional and psychological states that investors and traders go through as they react to market conditions. Here is a short summary of each stage of the market cycle: 🔵 Disbelief: At this stage, market participants are skeptical about the potential for a market rally or recovery. They may be hesitant to invest or trade, as they do not believe that the market has the potential to improve. 🔵 Hope: As market conditions begin to improve, investors and traders may start to feel more hopeful about the future. They may start to see opportunities for profit and become more willing to take risks. 🔵 Belief: At this stage, market participants start to believe that the market will continue to improve. They may become more confident in their investment decisions and become more willing to hold onto their positions for longer periods of time. 🔵 Euphoria: As the market continues to rise, investors and traders may become overly optimistic and start to believe that the market will continue to rise indefinitely. This can lead to excessive risk-taking and overconfidence. 🔵 Anxiety: As market conditions start to deteriorate, investors and traders may become anxious about the potential for losses. They may start to question their investment decisions and become more hesitant to take risks. 🔵 Denial: As market conditions continue to worsen, some investors and traders may start to deny that the market is in a downturn. They may continue to hold onto their positions in the hope that the market will recover. 🔵 Panic: At this stage, market participants may become panicked about the potential for further losses. They may start to sell their positions in a rush to get out of the market. 🔵 Capitulation: As market conditions reach their lowest point, investors and traders may give up hope and sell their positions, even at a loss. This is known as capitulation. 🔵 Anger: After the market has bottomed out, some investors and traders may feel angry about their losses and the perceived market manipulation or wrongdoing that they believe caused the market crash. 🔵 Depression: After experiencing significant losses, some investors and traders may feel depressed and lose motivation to engage in further investment or trading activities. 🔵 Disbelief: As market conditions begin to improve again, some investors and traders may return to a state of disbelief and skepticism about the potential for a sustained market rally. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work , Please like, comment and follow ❤️

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Number of Sunspots and Inflation CYCLES Hi friends Today im going to explain about the relationship between Sunspot Numbers and Inflation rate from 1960 to now. so lets start with inventor of this theory : William Stanley Jevons's In 1875 and 1878 Jevons read two papers before the British Association which expounded his famous "sunspot theory" of the business cycle. Digging through mountains of statistics of economic and meteorological data, Jevons argued that there was a connection between the timing of commercial crises and the solar cycle. it called 5.31-Year Cycle too. In the stock market and in the economy, there are both natural frequencies and artificial excitation frequencies. The four-year presidential election cycle is a great example of an excitation frequency, and it has demonstrable effects on stock prices. The schedule of FOMC meetings 8x per year is another possible example of an artificial excitation frequency. When a demonstrable cycle period appears that one cannot tie to some manmade excitation frequency, then the supposition is that it is a "natural" frequency of the economic system. Something about the economy or the market results in an oscillation on a certain frequency which may not have a good outside explanation. Perhaps it is in how money flows. Perhaps it is in how human brains make decisions about surplus and scarcity. It is hard to know. This 5.31-year frequency in the CPIs cycle seems to fall into that category as a natural cycle, because the 5.31-year period does not match any known excitation frequency related to human activity nor the economic calendar. So that makes it probably a natural frequency. In above chart , there does seem to be a relationship between sunspots and the inflation rate. We see lots of instances when the peak of the sunspot cycle coincided with the peak of the inflation rate. There have been spikes in the inflation rate not tied to the sunspot cycle, such as the spike during the Arab Oil Embargo of 1973-74. this examples did, interestingly, come at the halfway point of the sunspot cycle, fitting the half-period harmonic principle(5.31 year cycle). The current rise in inflation fits both the longstanding 5.31-year cycle and the upswing in the sunspot cycle. Solar researchers expect the current sunspot cycle rise to end in July 2025, which is 3 years from now. But the 5.31-year cycle says a top in the inflation rate is expected right now. That would mean seeing the inflation rate bottoming around 2025 just as the sunspot cycle is peaking. Sometimes cycles present us with conflicts that are hard to reconcile. The point of the 5.31-year cycle that we can take away for right now is that the inflation rate should be falling for the next ~2.2 years. But that does not mean we get to zero percent inflation right away. The drops take a while to unfold. Inflation is likely with us for a while, and we have to get used to that idea.

Education

by TraderAmin-KZ

ECONOMIC CYCLE & INTEREST RATES Hello traders and future traders! The state of an economy can be either growing or shrinking. When an economy is growing, it typically leads to improved conditions for individuals and businesses. Conversely, when an economy is shrinking or experiencing a recession, it can have negative consequences. The central bank works to maintain a stable level of inflation and support moderate economic growth through the management of interest rates. What is an economic cycle? An economic cycle refers to the fluctuations or ups and downs in economic activity over a period of time. These cycles are typically characterized by periods of economic growth and expansion, followed by periods of contraction or recession. Economic cycles are often measured by changes in gross domestic product (GDP) and other economic indicators, such as employment, consumer spending, and business investment. Economic cycles can be caused by a variety of factors, including changes in monetary and fiscal policy, shifts in consumer and business confidence, and changes in global economic conditions. Economic cycles can also be influenced by external events, such as natural disasters or political instability. Understanding economic cycles is important for businesses, governments, and individuals, as it helps them anticipate and prepare for changes in the economy and make informed decisions about investment, hiring, and other economic activities. How is an economic cycle related to interest rates? Interest rates can be an important factor in the economic cycle . During a period of economic expansion, demand for credit typically increases, as businesses and consumers borrow money to make investments and purchases. As a result, interest rates may rise to control the demand for credit and prevent the economy from overheating. Higher interest rates can also encourage saving, which can help to balance out the increased spending that often occurs during an economic expansion. On the other hand, during a period of economic contraction or recession, demand for credit tends to decline, as businesses and consumers become more cautious about borrowing and spending. In response, central banks may lower interest rates to stimulate demand for credit and encourage economic activity. Lower interest rates can also make borrowing cheaper and more attractive, which can help to boost spending and support economic growth. Overall, the relationship between interest rates and the economic cycle can be complex and dynamic, and the direction and magnitude of changes in interest rates can depend on a variety of factors, including economic conditions, inflation expectations, and the goals and objectives of central banks and other policy makers. I hope you leant something new today!

Education

What are new-home sales and why do they matter to the economy?Upcoming week we have two important major events happening for the U.S , one of them is the new-home sales. But what exactly are new-home sales, and why do they matter? In this post, we'll break down what new-home sales are and explain why they're so important to the overall health of the economy. You also be more prepared and informed why the market moved in a certain way. Lets move on... What are new-home sales and why do they matter to the economy? New-home sales are a measure of trading activity in the market for newly built homes. The new-home sales data are important leading indicators of economic activity, providing timely information on changes in the demand for new homes, which directly affects decisions regarding investment, production, and employment. The data on new-home sales also provide valuable information on the market fundamentals that are shaping trading conditions in the market for newly built homes. The data can be used to inform decision-making about pricing, product mix, and other strategic considerations. In addition, the data can be used to assess market conditions and identify emerging trends. As such, new-home sales data are an important tool for monitoring and understanding the health of the economy.‍ See historical graph here: fred.stlouisfed.org Impact of new-home sales When new-home sales activity levels rise, it has a positive impact on the economy as a whole. For consumers, this increased activity level leads to currency being put back into circulation. When builders see an increase in new-home sales, they are able to reinvest that currency into building more homes, which in turn provides more jobs for other industry players. The increased activity also has a positive impact on the stock market and it's currency, as builders and other companies who stocks are traded publicly see their stock prices increase. This provides more stability in the markets and can lead to more investors feeling confident about putting their money into the markets. Ultimately, when new-home sales activity levels increase, it provides a boost to the economy as a whole.‍ New-home sales are an important economic indicator because they signal overall consumer confidence and spending. Increased new-home sales activity levels have a ripple effect throughout the economy, benefiting consumers, builders, and other industry players. We shall see what impact the new-home sales will have this week on EURUSD. We can currently see we are stuck in a range between support and resistance - let's see what the week will bring. Trade safe around these hours! Cheers.

Education

by vuetratrading

GOVERNMENT BONDS YIELD. INVERTED CURVE What are GOVERNMENT BONDS YIELD? Bonds are Fixed Income instruments that allow investors to anticipate the flow of funds they will receive. What does an inverted yield curve mean? Put simply, this means that short-term US debt is more profitable than long-term debt. Economic theory says that in a “normal” situation, long-term lending should be more profitable than short-term lending. An inverted yield curve occurs when the yield on short-term bonds (US03MY, US06MY, US01Y) is greater than the yield on longer-term bonds (US30Y, US20Y) . This is bad for the economy and worse if it is the United States because it means that they are relying on the economy in the short term since the "normal" thing is that long-term bonds give better yields. Some economists and analysts see in this situation an indicator that a next economic crisis is coming, either in the form of a slowdown in GDP or even a recession.

Education

Rates Rise Building Permits Decline Recession Follows Here's a chart of the relationship between building permits (which come out this week) interest rates, and recessions. When rates rise permits drop and recession follows. This week's building permit numbers could be are not likely to be good.

Education

4-8th April Economic Outlook!Hey traders, Today we're going to be looking through this weeks economic calendar. We're going to look at what data is going to be released and what really is going to be affecting the market. I will also share my bias on the different pairs and the different data being released to see if any of these are going to be tradeable or whether or not we should just kind of stay out of the market during these times of uncertainty. I hope you enjoy this outlook into the week ahead. It's going to be a quiet week compared to recent times unless we get any breaking news coming out of Russia and Ukraine. In terms of economic data releases, it is going to be a little bit quieter than usual. Monday - 4th April We don't have too much happening in our favor on Monday. Here the biggest release is the unemployment change for Spain. While it may move the euro just a little bit, I'm not seeing a whole lot of tradeable opportunity. I think Monday is going to be a lot better just to kind of sit back and watch to see what happens. Tuesday - 5th April On Tuesday, we get a little bit more exciting. We have a fair bit of data being released for us. 🟨 AIG Construction Index Early in the morning we have the AUD, AIG construction index. This index indicates how well the construction industry is actually running at the moment, it's not something we're going to trade, but rather it's good insight as looking ahead into the PMI, into our employment rates and then overall trade balance in the future. It is a good indication of how well the economy is running confined into that construction sector as it is a very large employer in Australia. 🟥 Cash Rate Coming in a little bit later in the day, we have a very large, definitely tradeable event with the RBA rate statement and their overall cash rate. The forecast is for it to remain at 0.10%. I believe this will remain at 0.10%. I'm not expecting any shock announcements. However, in the event we do get a shock number come through, it's going to be a very volatile time and a possible opportunity to be able to catch a lot of pips on the Aussie dollar. If we do get a shock event on this, it will move for a few hours prior to entering into the European market so keep an eye on this release. ⬜ EUR Looking ahead, we do get a lot of services PMI coming out for the euro, but not really looking to be trading that. I'd rather use that as an indication of how well the economy is running, looking ahead into future releases. 🟥 ISM Services PMI The biggest standout is the ISM services PMI for the US dollar. Obviously the market is forecasting growth in the services industry. I'm not too sure how well that's going to stand. It's not something I usually trade. However, given the previous data releases, I'm unsure if it's going to be able to maintain its bullish forecast. We've been told that construction spending is down, the manufacturing PMI, while still expanding has slower growth than what it was first anticipated. Our nonfarm employment change was negative. There's a lot of different areas suggesting that we may not be as hawkish as what the forecast says. So I do expect this to come in a little less than what we're looking at currently but only time will tell. Wednesday - 6th April 🟧 Crude Oil Inventories This is going to be an interesting one. This is something I've been looking to try to look to how it affects the US dollar, but rather something I'm just overly intrigued about given the current circumstances in the world. 🟥 FOMC Meeting Minutes FOMC meeting minutes is always volatile one. it is good to have a look through what the meeting discussed and how it went on. For users that don't know how this affects the market FOMC meeting minutes is a detailed record of the FOMC's most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates. Thursday - 7th April 🟨 AIG Service Index Another AUD index release. We have the construction index earlier in the week, now we have the services index coming out. Once again it's not something I trade, however, it is fantastic insight into retail sales data. When we do get those retail sales announced next week, we can use this services index to give us a pivotal action point on where those retail sales are aiming, which is why I've noticed that in today's economic calendar, it's worth noting because we can make a preemptive play on the retail sales data release. 🟨 Retail Sales The Euro retail sales expecting a little bit of an increase with the overall potential panic buying happening across Europe. It's going to be interesting to see what happens here. We massively missed the forecast in March. However, it is looking like they've been a little bit bearish while still forecasting growth of 0.6%. Banks are no longer aiming for the real high numbers, I think we're going to come in maybe around 1%, but I'm not putting money on that prediction, it is rather an assumption. I will have to do some more research and I recommend you do you same as well, having the services PMI come through this week from all the different countries within Europe is going to be a great insight into how well the economy is actually performing on the retail sales front. Friday - 8th April Nothing worth mentioning on Friday, the week is going to come to a slow stop. As I said, it is a bit of a slow week this week, only a few different data points worth noting, so we will end the week quite quiet. Obviously, we might have a bit more movement on the fundamental side of things next week but this week looks like it's lining to be a great technical analysis trading week. Always keep your eye on the whole Russia and Ukraine situation because anything can happen there and the market will react accordingly. Do keep your news streams live and in depth as you don't want to be caught off guard by anything going on over there. These are personally just my outlooks having a look into the future week. Do note the data to keep an eye on when they are released and of course you can use the TradingView calendar as well to keep note on that. Have a fantastic trading week, I wish you all the best success.

Education

by the5erstrading

The Anatomy of a Bear Market Recently, a lot of people have been talking about the possibility of a multi-year recession. I don't think that is a clear depiction of the current situation, but I am aware that the idea stems from a lack of understanding of bear market structures, and influence of market sentiment. So in this post, I'll be going over Ken Fishers' rules and conditions that must be met in order for a market to be clarified as a bear market, and how you can best position yourself to minimize downside risk. This is not financial advice. This is for educational purposes only. The Four Rules of a Bear Market - The first rule is the two percent rule: a bear market typically declines by about 2% per month. - Sometimes it declines by more than 2%, sometimes it’s less—but overall and on average, bear markets don’t often begin with the sharp, sudden drop some anticipate. - If a bear does drop by more than 2% per month, there’s often a market counter-rally that can provide better opportunities for investors to sell. - The three month rule: This rule advocates waiting three months after you suspect a peak has happened before calling a bear market. - Rather than trying to guess when a market top might come, this rule ensures one has passed before taking defensive investment action. - It provides a window of time to assess fundamental investment data, market action and possible bear market drivers. - I often see lots of people call market tops and bottoms, and time the market perfectly, but it needs to be clearly understood that this isn't the right approach to understanding the market. - Next, we have the the two-thirds / one-third rule. - About one-third of the stock market’s decline occurs in the first two-thirds of a bear’s duration, and about two-thirds of the decline occurs in the final one-third. - This was the case in the bear market caused by the financial crisis, as well as many other bear markets including that of 1973. - Combining this with the three month rule, it also implies that if you have identified that a market has indeed begun its bear run, you might be better off taking profits/losses on your position, managing risk by increasing your cash holdings, and buying back when capitulation has happened. - And finally, we have the 18-month rule. - While bull market durations vary considerably, statistics demonstrate that the average bear market duration, since 1946, has only been 16 months. - Very few in modern history last fully two years or longer. - If you’re engaging a defensive investment strategy, you probably shouldn’t bet on one lasting so long. - The longer a bear market runs, the more likely you’re waiting too long to re-invest. - If you remain bearish for longer than 18 months, you may miss out on the rocket-like market ride that is almost always the beginning of the next bull run. - Missing that can be very costly for investors. So are we currently in a bear market? - Based on the four rules above, there's a high probability that we are not in a bear market. - Since I've uploaded this post, the market has bounced swiftly off the 100 moving average on the weekly. - Just as the covid-induced drop of March 2020 turned out to be a 'buy the dip' opportunity, as opposed to the beginning of a bear market, the sharp correction we have seen since the beginning of this year goes against the first rule of the bear market. - It’s critical not to call a bear market falsely, and this is a huge mistake that a lot of people make. - If the market is just going through a correction (a short, sentiment-driven downturn of -10% to -20%), you’re better off riding through it and maintaining your portfolio. - It is impossible to accurately and consistently time market corrections because of the way they behave. - A correction can start for any reason or no reason. So if you believe that the economy is strong, and the fundamentals of the company you invest in remain solid, there's no need to sell off your holdings, especially when your actions are motivated by fear. Conclusion Bull market corrections are not fun, but it's important as an investor for you to be able to distinguish bear markets/recessions from bull market corrections. Choosing to undertake a bear market investment strategy and go defensive should be rare and shouldn’t be done by gut feel or by your neighbor’s opinion. Exiting the market is among the biggest investment risks you can take—if you’re wrong and you have a need for portfolio growth, missing bull market returns can be extremely costly. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)

Education

by Michael_Wang_Official

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