A Market Driven by Central Banks - Trade It, Don't Lament It
• Many hedge funds and individuals have left the markets citing 'warped fundamentals'
• The rise of central bank balance sheets and influence has certainly eclipsed standard growth and 'risk'
• Yet, the first tenet of fundamentals is determining what is important, and following its development
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There have been a number of high-profile hedge funds - and many more individual traders - that have closed shop lately, and a common reason stated for their departure is a market that no longer follows the natural order of 'real' fundamentals. In recent months and years, the monetary policy of major central banks has materially altered the landscape for capital and FX markets. It not only draws a distinct value contrast between currencies, but it also distinguishes the value of different regions capital markets and alters the level of sentiment on a universal basis. While this influence may draw distinct contrasts to traditional GDP or risk/reward themes, it is a key driver. What's more, it is relatively easy to benchmark and incorporate into our analysis. That means it is in some ways easier to trade with. We discuss why a market based on monetary policy isn't something to bemoan, but rather take advantage of in today's Strategy Video.
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