Why investors should mind the gap

Article Abstract:

The US dollar has an impact on te US stock market, and a drop in US stock prices could mean that foreign investors are also hit by a drop in the value of the US dollar. The US has a large current account deficit, and it is increasing. Capital flows have helped to offset this, with US financial assets in demand. Demand for US assets could drop, leading to a drop in the value of the US dollar and US equities. Overseas investors are becoming increasingly important and this brings greater risk of volatility. The US deficit may still be reduced without threatening equities or the US dollar.

Exchange Rates, Balance on Current Account, United States economic conditions, Balance of trade

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Breaking the link between the dollar and shares

Article Abstract:

The US dollar has not been affected by a fall in stock prices. Reasons for this are examined in detail.

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Why investors should mind the gap

Article Abstract:

A drop in the FTSE-100 inde means that the relationship between long index-linked government securities and the FTSE-All Share dividend yield has returned to average levels for the 1990s. Stock prices could still be under threat and this is because equities should give higher yeilds than index-linked government bonds. Equity risk may be underestimated by investors and a drop in the value of the US dollar could mean that investors have become more wary of risk.

Portfolio Management

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Subjects list: Economic aspects, Stock-exchange, Stock exchanges, Exchanges, Dollar (United States)
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