But if you want to see what financial market players think, there’s one indicator you can follow: The exchange rate of the Mexican peso.
These days, it tends to decline in value against the U.S. dollar when Trump gains momentum … and rise in value when the opposite happens. The rationale? Investors believe Trump’s efforts to curb immigration and re-work trade deals like NAFTA will hurt Mexico’s economy over the longer term.
With that in mind, it’s worth noting that the peso rallied as much as 2% overnight. That’s a snap market judgment that Clinton “won.”
|One indicator to follow is the Mexican peso.|
Just to make something clear while I’m at it: I’m as apolitical as they come – not to mention, a registered Independent. So I’m purely referring to the market’s opinions, not my own.
Want to follow the peso yourself? Well, there used to be a Mexican peso ETF. But it no longer exists. So one of your best bets is to use the Bloomberg website. Just keep in mind that Bloomberg quotes the currency pair in reverse. So a DECLINE in the charts there represents a RISE in the peso against the buck.
You can also track the performance of Mexican stocks, which are obviously influenced by the peso’s value and by expectations about future Mexican growth. The ETF to follow is the iShares MSCI Mexico Capped ETF (EWW). It’s down a couple of percentage points so far this year.
So what do you think? Did Trump win last night’s debate? Or did Clinton? Is the Mexican peso a solid proxy for Trump’s chances, and are you following it? Add your voice to the debate when you get a minute.
Meanwhile, what’s going on at Deutsche Bank (DB)? What do the firm’s struggles mean for the health of other European institutions? And what impact would a meltdown there have here on U.S. markets? Several of you weighed in on those topics in the last 24 hours.
Reader Joseph M. said: “We keep propping up failing criminal banks so the economy will avoid crashing. Each time we avoid a crash, the problems get bigger and the next crash will probably be far worse. Why can’t we let things crash and let the market straighten things out while we suffer for our past mistakes … before things get even worse?”
Reader Robert T. said: “I would think the European Central Bank would step in and provide funding the moment DB faced a potential ‘run’ on its deposit base. However, stock and bond holders should brace for losses unless DB can show the markets that it’s capitalization could withstand a $14 billion shock.”
Reader Linda G. added: “DB has dealings with every major U.S. bank. We’ve known this for a long time. The only question was: When would the Fed let go? It was their timetable.”
And Reader Tom said: “Angie might not want to bail them out if the unthinkable happens, but Auntie Janet will be there with the Fed backstop. Back in 2008-2009, the Fed pumped billions of dollars into Euro-banks to help avoid a total meltdown of the banking system. They will do it again.”
Thanks for jumping into the discussion. I think it would take a real meltdown at DB for the German government to step in. By that, I mean not just a gradual stock market decline, but an absolute collapse in the firm’s shares and bonds, as well as signs of retail and institutional depositor flight. They just won’t have the political cover to do so otherwise.
Could that happen? Absolutely. Banking is a business of confidence, and if confidence snaps, you can move from concern to crisis in the blink of an eye. So keep an eye on DB, as well as all of its European peers that trade here in the U.S. We could be in for another round of financial contagion.
Any other thoughts? Share them below.
Things like rent and health insurance keep getting more expensive. But at least we’re saving money at the grocery store … or so says this interesting Bloomberg story.
It chronicles how we’re seeing widespread deflation in supermarket food costs, the longest stretch since 1960 (except for the recession year of 2009). Falling commodity prices and cutthroat competition are a couple of the contributing factors.
Saudi Arabia has been bleeding cash due to low oil prices, and its budget deficit has ballooned to 13% of GDP. Now, the country’s workers are going to feel the pinch.
The government is slashing bonuses and benefits that public sector workers grew accustomed to during the $100 oil days. That’s a big deal considering roughly two-thirds of the nation’s working population is employed by the government.
Speaking of oil, Iran threw cold water … again … on proposals for OPEC-led production cuts. The country wants to boost output to 4 million barrels per day (up from around 3.6 million BPD now), and isn’t willing to team up with Saudi Arabia and non-OPEC nations like Russia to curtail supplies.
The social media company Twitter (TWTR) continues to attract interest from larger suitors. Walt Disney (DIS) is reportedly considering a bid for Twitter, joining other tech firms like Salesforce.com (CRM) and Microsoft (MSFT).
What do you think about these reports of lower grocery store prices? How about the ongoing oil market machinations, and the self-inflicted pain that Saudi Arabia is suffering as a result? Any thoughts on the bidding war for Twitter, or other recent M&A deals? Let me hear about them in the comment section below.
Until next time,