This week the financial markets around the world have taken a real beating. For many years, countries around the world have looked to Asia for growth. The latest economic and market news out of China has not been calming to investors. China’s economy has grown so large that it’s no longer a trivial matter to rack up 7% annual GDP gains. In fact, those days could be long gone, which is the fact that is perplexing people around the world. With Europe, North America, and now the so-called “BRIC” nations showing slow growth, what will become of investments? Most investors are now waiting for clear confirmation about the direction of interest rates in the U.S.
Christian Broda since 2009 has been going against the grain of many of his fellow economists. A majority of them have been expecting a continuing slide for a weak dollar. Many of his peers argued that the days of the petrodollar were over. They predicted the dollar would be replaced as the reserve global currency. People who listened to Broda early this year have seen the dollar increase by 8%. Dollar strength is always a controversial subject in economist’s circles. A strong dollar can hurt exports and even cause lower spending at home. Still, the prestige that comes with being the world’s reserve currency has its advantages. From a strict viewpoint of price appreciation, Broda’s calls early this year have been proven dead on.
Economists are now scrambling to come up with an economic view of the next three months for nervous clients. They’re all waiting to see if the Fed raised interest rates and to see if the dollar continues to strengthen. They also have to factor in the cost of raw goods, the employment numbers, and housing starts. All of this economic data not only has to be sifted through, but sense must be made of it. With potentially billions of dollars on the line, investment funds and major institutions can barely afford to be wrong. If they are, their new investment dollars will dry up and existing clients may head for the exits. For the funds that are right, the opposite will happen. They’ll be the recipients of a massive influx of new clients and funds. These people will be impressed about current returns during a rough period of volatility. Economists earn their incomes every day be helping investors deal with the constant tumult in the markets. It’s not like it’s every going away. The fallout from China is long from over. The situation with the dollar is not settled at all. These are the types of times when big money will be spent or lost. So far Broda has been on point about his dollar views.