On October 14, 2016, money market reform here in the U.S. is slated to be implemented. And the potential repercussions are already being witnessed, as investors do not seem to want to wait until implementation day to begin making adjustments to their money market portfolios.
With other major central banks easing and the Fed looking to hike rates, the U.S. dollar strengthened broadly. In fact, the Bloomberg Dollar Spot Index (BBDXY) recently powered through the previous cycle highs of March 2015. With the trend in dollar appreciation potentially resuming, where are markets likely to head next?
One of the most important themes impacting the global markets has been the strengthening U.S. dollar, a trend that WisdomTree expects to continue for some time. One consequence in terms of investor positioning has been a surge in flows and interest in currency-hedged international investment strategies. But this also has put pressure on the U.S. economy, revenue of American companies as well as corporate profits.
Over the last six weeks, financial markets have continued to grapple with the current and future implications of the one-day devaluation of the Chinese yuan. While we and other market participants failed to see this move coming, we believe it is important to put this shift in policy in context and attempt to understand what Chinese officials are ultimately aiming to achieve.
When making investment decisions, many are familiar with making allocation decisions between large and small caps or between growth and value stocks. Recently, as a result of the divergence in central bank policies, investors have also had to take views on international currency risk, with clear winners and losers. But what about the currency impact on domestic equities?