Tuesday, 6 February 2018

MONEY, MONEY, MONEY (INVESTING AND THIS WEEK'S STOCK MARKET TURMOIL)

On the blog I tend to talk about touchy subjects like politics, social justice and even feminism, so it's only natural for me to want to talk about money. I've divided this blog post into 2 parts - the first part deals with what's currently happening in the stock market and especially this weeks stock market turmoil. The second part deals with my personal take on investing and money. 

Disclaimer: I am by no means an expert on the topic of money and the economy, and my knowledge is limited to second year economics modules (Which I did get distinctions in just BTW ;)). 





WALL STREET WAS SLAYING IN 2017


2017 ended up being one of the best years for the US stock market in a very, very long time. Something which good ol' Trump took lots of credit for

"What that means is that, whenever you see that number go up on Wall Street, it means jobs, it means success, it means 401(k)s are flourishing," Trump told reporters.



One of the ways we measure how the economy is doing is with the Dow Index, a stock market index of the 30 major companies on the New York Stock Exchange. The Dow index ended 2017 25% higher, making it the best year since 2013.

So things have been looking pretty good. Possible reasons for this booming stock market have been economic growth, increased corporate profits and the tax cuts President Trump implemented (Which take corporate America's side. Whether they will actually benefit the average American is another question). 


BUT WHAT'S HAPPENING TO GLOBAL STOCK MARKETS THIS WEEK?


None of that really explains why the Dow plummeted on Friday. It actually does. One of the other accomplishments of 2017, was increased overall wages in the country. While increased wages may seem like a good thing, any economics student will tell you that it screams inflation and higher interest rates. Why? It comes down to supply and demand. Higher wages means there will be more demand and this increases prices. Inflation leads to higher interest rates on borrowed money. It's a knock-on effect. 

And this is what might be happening right now. The fear of inflation may be causing the stock market to plummet.


HOW DOES THAT AFFECT THE REST OF THE WORLD?


On Monday the 5th of February, the Dow index was down 1,175 points, the most in its history. Although all of this is happening in the US economy, the US is home to the biggest financial market in the world and whatever happens on wall street affects the rest of the world's stock markets. Even the JSE. The JSE has been on a 8 day downward streak, with it opening on Monday 2.5% lower. And while it is still early to predict, it is a safe bet that things aren't getting better anytime soon. 


MY MONEY STORY (AND WHY I'M TELLING YOU THIS)


I woke up today to find my own stocks much lower in value than they were this time last week. Like thousands of rands lower in value. So yeah, I freaked out a little. 

One of my majors is economics and I've always been interested in the way markets and stock exchanges work. Last year I was lucky enough to have a little extra ka-ching and thought it would be the perfect opportunity to get in the game. 

My investment portfolio is small and moderate, with some being safer and some riskier. At the moment I mainly invest in an equity fund, individual stocks and a foreign currency (dollars - not the smartest option right now). All of which have gone down in the past week, just BTW. But as any investor should know, markets are by nature volatile. A short term spike or loss is just that - short term. At times like this you just have to keep calm as it's almost always a bad idea to run for the hills. Markets DO recover, and it's all about the long term.



I'll just leave it at that but if you'd like me to go more into detail about my thoughts on investing, what I've learnt so far and just if you want more blog posts on money and economics, let me know in the comments!

1 comment:

  1. Great post.. please do give more info since your post is so informative

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