Understanding Global Stock Index ETFs
Global stock exchanges have caught a very volatile environment lately, with the spotlight being on the ongoing trade war between the U.S. and China. This war has had some of the world’s largest financial players scrambling to determine which nation will be first to rise above the economic quagmire that currently exists. While many are predicting that the U.S. will emerge as the victor in this trade dispute, others are expecting a long drawn out war that will leave both nations feeling vulnerable. This article will provide insight into how the global stock markets could react during this period of conflict.
As I write this article however, I can’t help but notice how calm and tranquil it seems to be on the worldwide stock market. With the news reports from the Financial Times, Financial Daily, and other media outlets, it seems as if investors from around the world have put the war in the past and are now focusing their attention on how global stock indexes might impact if the two countries can resolve their differences through dialogue. Many investors also seem to be taking advantage of the relaxed trading hours, which means that they can more easily focus on other factors such as which company is expected to emerge as the victor in the ongoing trade war. In fact, many traders have begun to tip the odds in favor of the Chinese.
What makes investors wait for the start of the global financial bear market? I believe the main reason is the fear of a major downturn. Fear is the number one reason that investors do not trade during a bear market. They hold onto their gains and wait until the worst is over. They also may purchase during a correction when they think the prices will turn around. Unfortunately, it seems that we may be entering a correction before the break of the top in May.
As we move deeper into the spring, the global stock indexes will begin to climb back. Traders who are early to the scene will benefit the most by being able to sell their shares before the large sellers decide to unload them. This means that traders that are right on the edge could see up to 25% gains on their investment in April. The low point for the decline could come as early as August or September.
During this time, traders will be watching to see what happens with United States stocks. If there is a major drop in the Dow or the Standard & Poor’s stocks, the United States may suffer a recession. However, if the United States economy weathers the storm, then the global stock index funds will benefit as well. The United States has a very strong economy with the dollar still very strong compared to other currencies. Many international funds are worried about the health of the American economy and are pulling out of the US stocks.
This means that the global stock indexes will appreciate if the US economy performs well, which is probably a combination of fiscal stimulus measures and more spending on infrastructure. If the Chinese economy tanks, then the stocks of U.S. companies will suffer. If the European Union suffers as Greece defaults, then the stocks of Europe companies will also take a hit.
In order to understand the reasons behind the volatility of the global stock indexes, it helps to understand the structure of the Dow and the NASDAQ. Dow and NASDAQ are two of the largest stock exchange indices today. They were established by brokers and corporations that trade in securities in the United States. The Dow is the product of a large number of companies and corporations all dealing in equities. The price of the Dow is determined by a variety of factors such as its market cap, company shares, and current sales revenue.
Global stock index ETFs are traded on different exchanges such as NASDAQ, NYSE, and OTCBB. Traders can buy ETFs that specialize in different sectors of the financial markets. Some traders might want to invest in both the Dow and the NASDAQ. There is no restriction for traders to trade in these two types of ETFs.