Portfolio diversification is more necessary than ever in these uncertain times. While the world is still grappling with the Covid-19 pandemic, financial markets are still dependent on monetary and fiscal policies specifically developed by governments with the aim of reducing the effects of this pandemic. Diversification of the investment portfolio between different asset classes can help traders manage risks and reduce the impact of the overall results of their trading on fluctuations in the price movements of a particular asset.
However, too much diversity can spell disaster, too. You should choose the assets based on your risk tolerance, the trading capital you invest, your strategies, and Your knowledge and current market conditions.
progress BDSwiss Over 250 currency pairs plus CFDs on stocks, metals, indices and commodities to choose from. Now let's look at some of the popular and famous assets that are worth considering in the current economic climate.
The rise of the euro against the US dollarEUR/ USD)
They offerForex market Lots of trading opportunities that emerge as a result of geopolitical developments, central bank policies and actions taken by various governments in response to the pandemic. One of the assets to watch at the moment is the euro, which is rising against the US dollar.
As the US central bank set an average target for inflation in 2020, a fall in the US dollar led to a rally in the euro. In December 2020, the euro rose to its highest level against the US dollar as it reached its highest level in more than two years, recording $1.2177. This has prompted the European Central Bank to pay close attention to this rally, which could lead to lower inflation on the European continent.
Many analysts expect the US dollar to rise again as a result of the massive stimulus measures adopted by the government of US President Joe Biden as well as the accommodative monetary policy pursued by the US Central Bank. The global economic recovery could also lead traders to abandon the safe-haven US dollar in favor of the euro. On April 28, 2021, the EUR/USD was hovering around two-month highs, due to the acceleration of the COVID-19 vaccination campaign in Europe.
Euro traders need to follow a number of factors during the coming period, such as the following:
- Distribution of COVID-19 vaccines in Europe and their success
- Eurozone GDP growth for the first and second quarters of 2021
- The monetary policies of the US central bank and whether it will agree to raise the interest rate as a result of the rapid economic recovery in the United States.
Some other Euro cross pairs that give a lot of trading opportunities, these include:
- EUR/GBP (EUR/GBPThe British pound benefited from the fading of tensions over Brexit and the EU-UK trade deal. With the British pound preparing to record gains from strong cyclical inflows of investment portfolios, then Husband EUR/GBP pairs to watch.
- EUR/AUD (EUR/AUD): Australia experienced a stronger economic recovery than that of the European Union. In addition, the Australian Central Bank has more potential to make monetary policy adjustments than the European Central Bank. In addition, concerns about inflation globally could lead to increased interest in commodity currencies such as the Australian dollar.
Top tech stocks to watch
witnessed Technology stocks A skyrocketing rise in 2020 as the coronavirus shutdowns have led to an increased proliferation of technology services. In the longer term, analysts advise looking for companies that will continue to maintain relevance after broader economic conditions return to normal. Here are some of the tech companies we think are poised to do well in terms of earnings:
- Facebook Inc.Facebook Inc): The platform continues to connect friends and families around the world. Moreover, this company which is one of the social media giants in the world is benefiting greatly from spending on advertising, which contributed to its growth during the economic crisis. The company recently launched its new e-commerce arm, which appears to bode well for the company.
- Apple company (Apple Inc): This tech giant is still a household name, and its offerings continue to attract customers. The company recently announced its intention to fund investments in the United States worth $430 billion over five years.
- Amazon Corporation (Amazon.com Inc): This e-commerce platform has been a huge success during the Corona pandemic, and we believe that it will remain an indispensable brand in the future.
Among other companies to follow is Microsoft (Microsoft Corpand Alphabet Inc.Alphabet Inc). Together, these five companies make up 22% of the S&P 500's market capitalization. Technology stocks typically rise in a low interest rate environment. However, analysts warn investors that they should be careful about risk factors such as the following:
- High Ratings
- The number of COVID-19 cases is rising in many parts of the world, such as India, which is a big market for some of these companies.
- Inflation fears
Other stocks to watch carefully
With the Joe Biden administration's new mantra of "Building Back Better" and a proposed $1.7 trillion infrastructure bill, there is good reason to grow infrastructure stocks. Here are some stocks to watch:
- 3M Company (3M Co.)
- Caterpillar Corporation (Caterpillar Inc.)
Financial Sector Shares
Inflation fears in the US are on the rise due to the unprecedented levels of US stimulus spending and the rise in US Treasury yields. It is true that the US central bank intends to ignore the rise in the inflation rate, but other central banks may raise their interest rates. Financial sector companies, because this would create opportunities to increase the net interest margin. For companies in this sector, you can move to other markets such as Britain and the European Union.
- HSBC Bank (HSBC Holdings PLC)
- Barclays ( Barclays PLC)
- Deutsche Bank (Deutsche Bank AG)
Commodities can be a convenient option during periods of high inflation
With inflation expectations rising, traders may view currency trading as unattractive due to low purchasing power. This may lead them to seek tangible assets such as commodities.
Usually, oil prices rise in parallel with rising inflation. This is because oil is a very important component of the economy on which manufacturing and transportation activities depend. On the other hand, gold is considered as a hedge against inflation, as its value increases as the purchasing power of the US dollar decreases. Goldman Sachs says that the price of gold could reach the level of $2,300 an ounce during 2021 as a result of increased demand for the precious metal affected by high inflation and economic uncertainty.
Cryptocurrencies as a hedge against inflation
While gold is praised as an inflation hedge, Bitcoin is often described as digital gold. In 2020, Bitcoin performed 10 times better than gold as a result of high demand among institutional investors who created investment portfolios of cryptocurrencies in order to face economic uncertainties. Other cryptocurrencies, such as Ether, have registered a growth of 200% YTD, due to the structural shift in the network towards protocol 2.0 which allows investors to earn interest as well.
Cryptocurrencies are usually more volatile than traditional assets, and traders should take into account this high amount of market volatility before entering into any cryptocurrency trade. and provide BDSwiss One of the most advanced trading platforms in addition to Unique and easy to use mobile trading app In order to help traders follow the markets and develop effective risk management strategies as they move from one place to another. You can trade CFDs on more than 20 cryptocurrency pairs as well as other assets in order to complement your risk diversification strategy.
Evacuation responsibilatyIn no way should the content of this article be construed in any way, express or implied, directly or indirectly, as constituting investment advice, a recommendation or a suggestion to use any investment strategy in connection with any financial instrument, in any way whatsoever: she was. Any views or opinions expressed in this e-mail message are those of the authors only and do not necessarily represent the opinion of the Company, unless otherwise stated. Any reference to past or simulated past performance contained in this document is not a reliable indication of future results.
- Reuters - The European Central Bank is following the rise in the value of the euro 'very carefully': Christine Lagarde
- Trading Economics – EUR/USD exchange rate – EUR/USD
- Pound Sterling Live – Bank of America says the days of easy sterling are over
- Markets Insider – Goldman Sachs says gold will rise 22% next year as investors use gold to hedge against rising inflation
- The Independent Market Analysts Are Expecting Cryptocurrency to Go Through Its Third Biggest Rise In Its History
- Coinmarketcap – Ethereum