No ‘Obama Bounce’ in Markets
Many investors were expecting what has been called the ‘Obama bounce’ in markets. Instead the S&P fell to an inauguration day record. Actually, based on 5 decades of data the Dow fell more often than it rose on Inauguration Day. Since by and large Forex markets follow equity markets there has been a slide in major currency pairs and limited Forex opportunity.
Dollar Declines Against Yen
The dollar has risen against the Euro and British pound but it has declined against the Japanese Yen. The dollars performance reflects a flight to safety and does not reflect optimism but pessimism. Newly elected Obama inherits an economy in shambles and many think that the first 100 days of a new administration can define a presidency. Obama is expected to announce many reforms and new monetary policies that can either increase or decrease Forex opportunities.
History On Obama’s Side
Historically Stocks rose in the first 100 days of a President’s term 11 out of 16 times. Political party doesn’t really matter but of the 5 times that equities dropped in the first 100 days, 4 out of the 5 were during Republican Presidencies. The good news is that although Obama has been handed a dismal economy, history is on his side and many economists expect to be celebrating a stronger stock market after the first 100 days of his presidency. Currency markets will most likely follow suit resulting in increased Forex opportunity.
World’s Eyes on Obama
The global economic news has not been good and the world’s eyes are on Obama and the United States which is seen as very proactive in addressing the global recession. In contrast the Euro Zone and the UK are seen as behind the curve in taking necessary action to stem the growing Euro Zone recession. In his inauguration address Obama state, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”
Obama Administration to Make Economy First Priority
It is a given that the Obama administration will make the economy their first priority. A strong US economy is necessary for the function of the global economy. A smoothly functioning global economy translates into increased Forex opportunities for investors. At present all eyes are on Obama and the new administration.
