The Week Ahead: Currency Wars and Commodities
Big declines in both the yen and crude oil may be giving the market a sneak peek at a near-term correction. But whether or not you believe a correction would be healthy at this stage, MoneyShow's Tom Aspray shares his market analysis and what you should watch for this week.
The action Friday in the stock market was overshadowed by the sharp declines in crude oil and gold in early trading. The widely watched SPDR Gold Trust (GLD) dropped to its lowest level since last August, and the nearby crude oil contract was down close to 2% during the day. Both did close above the early lows.
The major averages closed the week pretty much unchanged, even though the S&P 500 made new rally highs during the week. Meanwhile, the debate in the financial media continues to pit the generally bearish traders against the fundamental money managers, who consider many stocks to still be undervalued.
Of course, many of these money managers have had this view for some time, while traders can change their views several times during the same week. I try to analyze the market in terms of risk, and since mid-December the number of good-risk buying opportunities has declined significantly.
As we head into the long weekend, we also have the G20 meeting, where the focus is likely to be on the Bank of Japan's action to weaken the yen, as well as the deteriorating state of the Eurozone economy.
The so-called currency wars-better defined as competitive devaluation-have gotten a lot of press lately, particularly by those who are pessimistic about the economy and the stock market.
The currency war in the 1930s was facilitated by many countries going off the gold standard, as they tried to revive their economies by lowering the value of their currencies.