Among the examples of economic warfare provided by the School of Economic Warfare in Paris, it is worth mentioning the case of Mittal’s takeover of Arcelor and the situation of European iron and steel industry vis-à-vis financial globalization.
Over the years, the increasing number of takeovers, unions and joint ventures became an for market competitiveness. In this context, some of the takeovers stand out as hostile financial actions aimed neutralizing the opponent. Such strategic maneuvers are a significant source of concern for economic operators, as they observe the reaction of both private and public sector, which is likely to intervene in order to protect the sectors of national interests.
The acquisition of Arcelor operated by Mittal is a case in point because it involves steel, which is both one of the symbols of the European industry and the main material for other productive and strategic sectors. Both Mittal and Arcelor were two titans of the steel sector: while Mittal’s primacy consisted in the largest number of employees and produced materials, Arcelor could count on the most robust trade volume. In fact, when Mittal took it over, Arcelor was a very healthy company that had just incorporated the Canadian company Dofasco. Through this surprising trial of strength that no political or economic operator could have foreseen, Mittal secured a significant advantage on its competitors. In order to understand the strategic interests of this acquisition, it is necessary to examine Mittal’s communication campaign and the lobbying role of all the players, from the steel market to public opinion.
Looking at the steel market trends between 1980 and 2005, it is possible to notice that since the minerals coming from the Soviet Union entered the global market in 1992, both prices and demand of iron ore and steel increased significantly. If it is true that over a hundred countries produce steel, there is only a small group of states that influence its market trend: Brazil and Australia, for example, control 42% of the steel market.
Due to the impressive growth of recent years, China alone accounts for 40% of global steel production (349 million tons in 2005), of which only 3% is exported. One of the first crisis occurred when China decided to limit the export of carbon coke – the main fuel for blast furnaces. This resulted in a spike in prices of 600% and showed how a given economic choice (driven by the desire of full independence) had remarkable strategic repercussions.
In order to discuss the conflict emerged with the Mittal/Arcelor case, the School of Economic Warfare provides a deep analysis of the actors involved.
The Mittal family was the majority shareholder of this company and its funds were located in tax havens. If on the one hand the choice of acquiring Arcelor was motivated by economic and fiscal reasons, on the other hand it also hides some interests that the economic warfare should explore. The Mittal family remained the majority shareholder (51%), whereas the remaining part was divided between investment funds and institutions. In designing such a stake distribution, Mittal showed its strategic intelligence: with such a property assets arrangement, it was impossible for Arcelor to regain its business through another takeover.
Since it is more difficult to convince more shareholders to sell their quotas rather than a single one, it is more difficult to take over a business when there are multiple owners. Therefore, from the strategic point of view, Arcelor’s large pool of stakeholders discouraged competitors from acquiring it. Besides, Arcelor benefited from a strong political support on the international level thanks to its strong ties with governments and to its strategic appeal, since it was the symbol of a united Europe. The main shareholders of Arcelor –involved in the evolution of the company – were:
– The Luxemburg government: traditional stakeholder, represented at that time by Prime Minister Jean-Claude Junker, who had been very active on the European level and who initially opposed the acquisition of Arcelor by Mittal.
– The Belgian government, namely the Wallonia region, which also opposed Mittal acquisition after consulting Banque Lazard.
– Colette Neuville, who held 2.5% of the stocks and represented the small shareholders, abstained from voting on Mittal acquisition. Even though she had such a small quota, Neuville could have played an important role due to the fragmentation of Arcelor ownership.
– Romani Zaleski, French-Polish major shareholder and key man of Arcelor.
In order to secure its interests Mittal influenced decision makers and public opinion thanks to a network of associates:
– John Ashcroft, representative of the U.S. Republican right-wing party, Attorney General between 2001 and 2005. At the end of his political career he founded a lobbying agency and was hired by Mittal because of his moral integrity and relations with several members of European governments.
– Anne Méaux, press officer of Giscard d’Estaing, director of communication for Alain Madelin, who had entertained long term relations with prominent members of the French right-wing party.
– Partner banks of Mittal Steels. There were five banks which acted simultaneously to support Mittal’s takeover of Arcelor: Goldman-Sachs, Crédit Suisse, HSBC, Citigroup and Société Générale. Goldman-Sachs, which had been previously involved together with Citigroup in Arcelor’s acquisition of Dofasco, played a prominent role in Mittal’s takeover of Arcelor; Société Générale opened up an eight-million-euro credit line for Mittal.
Arcelor’s network was quite complex. It mainly consisted in both personal and business relationships: the actors would pursue their own interests while immerged in a broader network of bigger interests that would tower over those of the single actors:
– BNP Paribas and Calyon, Arcelor partner banks that had traditionally offered financial support. Merrill Lynch and UBS drafted the strategy while other institutions were also involved: Michael Zaoui from Morgan Stanley (brother of Yoel Zaoui, main strategist of Mittal) was appointed by Arcelor Management Board to consider Mittal’s offer.
– DMG – Michel Calzaroni, international communication agency, embraced market battles on behalf of food titans and French energy companies.
– Public Opinion. In order to influence public opinion, Arcelor chose Publicis Group, second best rated consultancy and media acquisition company.
– Skadden Arps, international law firm whose team was made of twelve professionals from France, Belgium and United Kingdom.
Mittal’s acquisition of Arcelor was supported by a well-designed communication campaign. Communication capacities are an essential asset for big firms, especially for those with a large number of shareholders like in the case of Arcelor, where small investors represented 85% of shareholders. In fact, this was the main problem Mittal faced when acquiring Arcelor, even more than the legal and economic aspect or the anti-trust regulations. While competition authorities of the United States, Canada and European Union were in the process of approving this operation, Mittal was allocated huge economic resources in convincing thousands of investors to support its project.
Between the above mentioned personalities, Anne Méaux played a very special role in the deal: she chose a strategy using multiple communication tools (such as press conferences, advertising on business magazines, conference calls and travels to Mittal headquarters) in order to convince the investors of the opportunities of the project; in a context of economic warfare, these communication strategies are able to address competitors with hostile messages. Mittal’s strategy was very detailed and engaged trade unions as well. Since February 2006, Mittal Steel had committed to communicate to Arcelor’s trade unions representatives its intentions about the industrial plan supporting the acquisition. The main points were occupational advantages and better work conditions, together with promise of keeping in place the agreements they had previously made with Arcelor.
Mittal also conceived a special communication strategy targeting shareholders mainly using specialized press and popular weekly magazines. Communication agencies focused on conveying a very positive image of the leader Lakshimi Mittal, through describing him as a successful self-made-man able to gather consensus both between businessmen and public opinion. Their goal was portraying Mittal as a successful entrepreneur interested in the development of his country; this made him much different from foreign investors that delocalized investments and performed a “reverse colonization” both on the economic and cultural side.
Arcelor counter-campaign, instead, presented Mittal as an inferior competitor presenting an “Indian” offer, derogatorily referring to India as a poor country (quite inappropriate considering India’s fast paced economic development). Supported by the belief to be able to rely on state aid, Arcelor tried every possible way to contrast Mittal’s attack and offered its small investors twice as much the dividends of 2005, hoping that they would have rejected Mittal’s offer. Since Arcelor’s strength consisted in the division of the ownership between small investors, in April 2006 this company offered another increase in the dividends. A month later, Arcelor announced to have received a very interesting takeover offer from a Russian company named Severstal: Mordachov, Severstal’s tycoon, would have acquired 32% of the company and the investors would have benefited from even more advantageous distributions of the dividends. Due to the initial lack of enthusiasm of Arcelor’s investors, Severstal decided to reduce its participation to 25% (that secured its position as majority shareholder), while discouraging Mittal from acquiring Arcelor and reassuring small investors on their pretty substantial profits.
Mittal’s decision to approach directly the group of Arcelor’s investors resulted in a winning move: almost the entire management board of Mittal – included Lakshimi Mittal – met with 70% of Arcelors investors and established open communication. This helped convincing their counterpart of the advantages of their acquisition offer.
This way, Mittal Steel managed to buy 34% of the Arcelor’s stake in May 2006. As the takeover took place, Mittal created the new management board in order to meet reassure the investors’ concerns about Lakshimi Mittal’s management, such as transparency of decision-making and compliance to share ownership arrangements. At the end of May, another key step was taken: in relation to a speculative investment fund, Goldman Sachs together with almost 30% shareholders requested to modify the approval procedure of Severstal proposal. At this point, the intervention of Zaleski – Arcelor’s majority shareholder – helped reaching a final solution. Thanks to the alteration of the procedures that Goldman Sachs had requested, Zaleski managed to buy more than 7.8% stocks so that by June 25th, Arcelor was fused with Mittal Steel with a final agreement granting shareholders 10% profits.
This case study highlights the importance of economic warfare that aims at protecting strategic sectors of a given field, preserving the resources and ensuring the employment development of related fields and more specifically of the industrial sector.
Besides the economic aspect of this kind of warfare, the School of Economic Warfare in Paris insists on its geopolitical aspects. In this perspective, the case discussed above has a number of hidden implications. For example, Mittal’s takeover of Arcelor can be interestingly considered as an operation aimed at containing Chinese expansionism.
Looking at the role of the United States, it is possible to argue that since the end of the Cold War, this country has adopted quite a unilateral approach in foreign policy that supported its role of world’s first economic power. Whoever challenges the American power, automatically becomes a rival, especially on the economic level. In this regard, China is a dangerous competitor that is able to successfully join forces with some African countries: through investing in education without linking any conditionality of human rights respect or fight against crime, Beijing creates alliances in another continent and gains profits from its own investments.
Besides, the Chinese government even reached a number of agreements with South American countries that are not limited to the economic sphere but also involve cultural aspect like the spread of Chinese language and culture. In Asia, China and India sealed an important deal aimed at going beyond containing the historical rivalry between the two countries: promoting in the Asian continent an environment of cooperation that is able to challenge the dominance of the United States.
Since India is the only regional actor able to contain China, the USA repeatedly tried to engage India as a trade partner, as mentioned in the deal between the two countries sealed in 2000.
In order to ensure its own economic growth and independence from other actors, China and India increased significantly their steel production and manufacturing.
In 2005, China’s consumption of steel accounted for one third of the world steel market and the very same year, Beijing became a prodigious exporter of steel. In the same timeframe, India’s steel production exceeded the needs of the country and this compromised supply-demand balance. In such a delicate phase for the steel sector, the political world did not welcome Mittal’s acquisition of Arcelor because of its impact on the strategic balance of power. From the United States perspective, Mittal was quite interesting and profitable:
– according to the authorities of the country, Mittal Steel group was not Indian;
– the reason for Mittal’s economic expansion was China. In fact, in 2004 Mittal was the first foreign company that managed to acquire 37.17% of a Chinese steel company.
The US financial community welcomed the fusion between Arcelor and Mittal, but the Department of Justice opened an investigation in order to make sure that the US could continue import large amount of steel from Arcelor. Besides, even on the financial level, Mittal’s acquisition of Arcelor confirmed the general world trend of the strategic formation of a few stable economic hubs.
As a final consideration on this topic, the European Union’s behavior vis-à-vis Mittal’s operation was quite surprising. Even though the EU originated from European Coal and Steel Community, (the organization promoting free trade for coal and steel), it did not adopt any measure to protect such a strategic sector whose value was both economic and symbolic.
‘Make That Trade!’ Biden Plans Unprecedented Stimulus for US Economy
The revolving doors to the White House, the Senate, and the House are set to welcome president Joe Biden and his administration. Now that the Democrats control the executive and the legislative branches of government, they have carte blanche to push through unprecedented economic stimuli to benefit all Americans. Taking center stage is a massive $1.9 trillion stimulus on top of the $900 billion stimulus recently passed by Congress under President Trump. Combined with the $2.9 trillion stimulus in 2020, the US economy is now flush with cash.
All that money has plenty of different directions to go, including Wall Street and Main Street. Americans across the board are anticipating $1400 stimulus checks to go with the $600 released in December 2020. Dubbed the ‘American Rescue Plan,’ the stimulus money is intended to get the economy moving again, by empowering consumers who have faced sweeping job losses, cutbacks, and personal difficulties.
The stock markets have reacted to these stimuli as expected – bullishly. A snapshot of the US financial markets confirms the impact of the stimulus, and what’s to come. The 1-year change for the major US indices reflects strong gains for the NASDAQ composite index (38.44%), the S&P 500 Index (13.17%), and the Dow Jones Industrial Average (5%).
Markets across Europe, the Middle East, and Asia have performed poorly over the past 1 year, owing to the government enforced lockdowns vis-a-vis the pandemic. The best performing European market over the past 1 year was the DAX (+2.38%). This begs the question: How will all the stimulus money impact the stock markets, and demand for gold?
What Happens When Central Banks Start Flooding the Market with Trillions of Dollars?
Monetary stimulus is designed to assist struggling American households who through no fault of their own were furloughed, or now face tremendous economic uncertainty. SMEs across the board are cutting costs, and letting people go. In December 2020, hiring rates in the US dropped for the first time in 7 months. Industries affected most by the pandemic include service-related businesses, travel and tourism, restaurants and bars.
It’s not only low income families struggling against adversity; it’s middle income earners too. Several measures have been proposed, including raising unemployment benefits to $400 weekly, and increasing the minimum wage to at least $15 per hour. All of these bold initiatives have yet to be passed by Congress, and signed into law by the President.
The effects of these massive stimuli will reverberate across the economy. There are definite winners and losers from massive spending. The Deficit/GDP ratio is already 15%, and monetary supply growth has increased by 25%. Inflationary concerns are growing, but for now the stock markets are shrugging off the prospect of higher prices and welcoming the stimulus. Low-income earners will benefit most from the stimulus, but every action has a reaction in the financial markets.
Currently, the Federal Reserve Bank has indicated no change to interest rates. This is surprising, given that bond yields are increasing. Multiple economists are concerned that the infusion of trillions of dollars into the economy will ultimately lead to rising prices, and nullify the intent of the stimulus packages. Equity markets and housing markets have shown tremendous resilience, and growth in recent months. State governments will be getting their fair share of stimulus money, as ‘financial healing’ kicks off in earnest.
TheFed’s bond-buying program continues in earnest as quantitative easing goes into overdrive. Millions of Americans remain out of work, and the unemployment rate is at pre-pandemic numbers. If the proposed economic boom kicks in, inflation will likely result before the end of the year. Markets across the US rallied in 2020, and bullish sentiment continues into 2021.
Analysts point to high valuations in the stock markets that are not supported by the fundamentals. The CARES Act was like a steroid shot for the market. The Paycheck Protection Program (PPP) ensured that at least some of the $1200 + $600 checks found a way to stock markets. Brokerages across the board reported increased registrations and trading activity. Americans are certainly taking to stay-at-home work/life by actively engaging in the financial markets. This will likely continue with an additional $1400 stimulus check.
Which Stocks Will Benefit?
Source: StockCharts.com SPX 500 Large Cap Index
Major US banks are set to benefit over the short-term, thanks to their ability to borrow money at short-term interest rates, and lending that money out over the long-term at higher rates. The biggest US banks should all see an uptick in stock price performance. Bank of America (NYSE: BAC) has a market capitalization of $285.563 billion, and the performance outlook for the stock is bullish over the short-term, mid-term, and long-term.
Wells Fargo & Company (NYSE: WFC) has a market capitalization of $132.469 billion, with a medium-term and long-term bullish performance outlook. Much the same is true for Citigroup (NYSE: C) with a market cap of $133.77 billion, and a medium-term bullish outlook. Energy efficient stocks will also benefit from the Biden administration. Companies like Tesla stand in good stead with a green energy-focused Presidency, House, and Senate
Analysis of bank stocks provides interesting insights. For example, BAC has climbed from November lows of under $24 per share to $33 per share. The stock price is higher than its short term moving average (50-day MA), and the long-term moving average (200-day MA) of $29.04 and $25.26 respectively. Technical analysis of BAC, using the Ichimoku Cloud confirms bullish momentum moving forward.
Indeed, experts at Bank of America attested to the benefit of passing the stimulus, without which a recession would have occurred. In a similar way, WFC stock, and C stock are also up sharply since the November 2020 lows. Bollinger Bands indicate that the run on bank stocks is likely to continue as momentum is clearly on rising prices for bank stocks.
Source: StockCharts AAPL
Besides bank stocks, there are plenty of other stocks to watch, including (NASDAQ: BKNG), Renesola Ltd (NYSE: SOL), Snap Inc (NYSE: SNAP), and Apple Inc (NASDAQ: AAPL).Pictured above, AAPL is currently trading around $127.14 per share [January 18, 2021]. It is bullish, compared to the 50-day moving average of $124.24 and 200-day moving average of $103.77 per share.
Bollinger Bands for Apple indicate a slight tightening,and stabilisation of prices at a much higher level than the lows recorded in July and August 2020. As the world’s most valuable company, AAPL is on the rise once again. Momentum indicators such as Ichimoku Cloud tend to suggest that AAPL is set for additional gains.
Which Sectors of The Stock Market Will Flop?
The shift away from crude oil and natural gas to green energy will cripple the oil industry and all the stocks that populate it. If these companies don’t start switching to alternative energy investments they will stagnate. WTI crude oil is currently trading around $52.09 per barrel, while Brent crude oil is trading around $54.76 per barrel [January 18, 2021].
The long-term charts of companies like Exxon Mobil Corp, Chevron Corporation, Royal Dutch Shell all point in the same direction – decline. In fact, these major multinational companies are at their worst levels in 10 years. US oil consumption is flattening out, while that of global oil consumption is increasing. Overall, nonrenewable energy sources such as oil and natural gas are long-term bearish, and best avoided. The global focus is on clean energy, not oil and natural gas.
Other long duration assets such as biotech stocks will likely slump over the short-term. Given that these stocks are discounted to the present, makes them unattractive to investors right now. However, any attempts to expand the Affordable Care Act will work to the advantage of biotech stocks, and pharmaceutical stocks, because people have greater access to healthcare.
The lukewarm reaction of stocks to the stimulus plan is predicated on the notion that additional stimulus will invariably result in additional taxes. If lawmakers in Congress require that taxes be raised in order to pay for the income redistribution, stocks will slump. The cruise ship industry, hotel industry, and entertainment industries still have a ways to go before a recovery is on the cards.
The strongest-performing sectors include many household names. The likes of shopify, Nvidia, cryoport, Pinduoduo, and Albemarle were considered winners in 2020. The biggest losers were airlines such as Boeing, and United, real estate and retail operations such as Simon, and oil and gas industries like British Petroleum.
Overall, the stocks which outperformed market expectations included freight and logistics, basic materials, Internet retail, software applications, and semiconductors. Heading into 2021, the S&P 500 index was up 16.3%, and growth continues. There are ‘moral hazard’ concerns with any big stimulus. Prior to the pandemic, approximately 20% of public companies were operational, but unable to repay their debts. After the pandemic hit, that number swelled to 32%.
How will the Stimulus Affect Demand for Gold?
Source: MarketWatch SPDR GLD
Traders and investors tend to buy gold when stock markets are performing poorly. The pandemic hit the brakes on the economy, and gold benefited. During uncertain times, gold becomes the go-to commodity, as it functions as a store of value. With trillions of dollars in stimulus money finding its way into the markets and households, there is no threat of a recession anytime soon. Gold prices such as GLD are off their highs, and trading at weaker levels.
When the Fed decides to raise interest rates once again, possibly to curb inflation, gold will again get hit. Since gold is not an interest-bearing commodity, it doesn’t benefit investors the same way that interest earning bonds do. As the 10-year yields on bonds continues to increase, capital will exit gold stocks, ETFs, and holdings and move to the bond markets, and interest-bearing accounts. That the gold price forecast is bearish is par for the course under current conditions.
It is against this backdrop of change and uncertainty that trillions of dollars in stimulus will weave its way into the fabric of the American economy through households and businesses. How that plays out in the stock markets remains to be seen, but for now all signs are positive.
Bitcoin Price Bubble: A Mirror to the Financial Crisis?
The Financial Crisis 2007-09 is without a doubt a nightmare the world once lived through and what still finds some traces in the financial systems today. The Real estate price bubble followed by a blind market crash led many of the Too-Big-To-Fail institutions to the verge of bankruptcy. In its retreat, the crisis laid the very foundation for risk management charters; like Basel Accords III stressing on the credit risk regimes and bank controls to avoid future market fiascos and averting any possibility of another financial turmoil. However, the financial crash coincided the emergence of an alternative financial system that not only bypassed the apparently faltering centralised banking systems but revolutionised the currency we knew in light of the financial crash.
The digital currency came into light in the same period when the world dealt with the smattering banking systems and volatile market conditions. Bitcoin, the first of its kind cryptocurrency, was created back in January 2009 just as the immediate effects of the financial crisis started to fade. The mysterious creator, under the pseudonym Satoshi Nakamoto, designed Bitcoin was an alternate currency to the traditional fiat money controlled by the centralised systems of federal and state banks of the countries denominating the currency of exchange. The intent behind Bitcoin laced the intension of a borderless currency to synchronise the global economy and markets into one absolute and seamless channel of trade. Bitcoin acted as a token-like element in exchange of real-life currency over a decentralised collection of systems controlled by users globally in a chain of command known as the Blockchain.
Although the ascent of Bitcoin was stagnant at first, it soon surged in popularity and subsequently in value over the course of years. Bitcoin bloomed up and beyond expectations, taking valuation of thousands of US dollars while its variants traded on a much lower price tag. The proponents of the cryptocurrency, also the main critics of the institutionalised nature of the global financial system, failed to realise, however, the dangers and pitfalls of a decentralised system of currency exchange and the total shit to digitalised units of trade. The latest Basel accords and their rendition of the laid principles and measures in the financial algorithms devalued over the years following the financial crisis are ultimately rendered futile in the world of unregulated cryptocurrency markets denominated in kinds of Bitcoin. Thus, although the probability of fraudulent activities is shunned to zilch courtesy of the complex disintegrated protocols associated to blockchain mechanisms incorporated in Bitcoin, the price controls are virtually impossible to place. This is due to the fact that digital currencies are already rendered extremely difficult to value accurately given the sheer volatility of the prices, making Bitcoin and similar cryptocurrencies almost impossible to distinguish artificial price bubbles from the actual gain of value.
This was proven within a decade of Bitcoin’s invention, back in 2017, when Bitcoin’s surged in value from trading below $3,000 to a whopping $2,0000. The price bubble was attributed to the gain of trust in the champions of Bitcoin, known as miners, gaining popularity in the digital fanatics while simultaneously driving heavy criticism from the financial industry gurus. The bubble, however, brutally popped on 22nd December 2017; crashing from a record peak of the time of $19,783.06 to below $11,000 in mere 5 days. While many of the venerated financial institutions, like JP Morgan, mocked the craze of Bitcoin, they also warned of the worst market crash the world has ever seen over the obsession and the relentless rise in value of Bitcoin despite of the steep risks involved.
With the onset of 2021, however, the financial institutions who once steered clear of the digital phenomenon, now have taken a polar position of yet another price surge rippling Bitcoin. This time around, the high volatility in Bitcoin is associated to Institutional investors as opposed to the speculators deemed culprit of the bubble back in 2017. However, the waves are more raucous than ever. Trading at $40,797.61, Bitcoin slumped down to $34,039 on closing of 12th January 2021, just in a span of 4 days. Bitcoin has posted an astounding 300% growth in returns; bouncing from $5,000, just before the hit of the Covid pandemic, to the record highs above $40,000 looming the Bitcoin trends. Though many sage minds associate the inflation-resistant characteristics and fixed supply features of Bitcoin to its surge of value and touching the shock resistant nature of Gold, many believe that the value is found to cascade since it’s not real investment in their definition. Now as the growing economies like UAE and China are spreading wings towards blockchain variants, stability in Bitcoin is a possibility overtime. Yet, is the worst of the rough price bubbles behind us or is a crash still imminent?
Flourishing Forex Market amidst Covid pandemic
The Covid-19 outbreak has halted the normal channel of life, people losing their livelihood and income has dwindled over the past eight months all over the world. However, in the tailspin the world has faced, the Forex accounts have witnessed a phenomenal growth over the pandemic-ridden months. Month-on-month growth has been recorded as close as 25-50% while the total volume has expedited at an all-time high of 300% growth. Over the past decade such a phenomenal growth was hardly ever seen since the last record high was a close to 40% which is mere compared to the colossal figure posted on the stage in June 2020.
The developing markets, however, post a lucrative section to invest in since the region has been the biggest contributor to the FX rise: close to 60% being the beneficiary of Europe, Africa and South Asian countries. Safe to say that this trend has been so steep largely due to the investors being ridden with optimism over the volatile prices of many of the commodities that were rendered stagnant over the previous decades. This includes the oil prices, gold valuation and even the real estate market that despite being involved in a price bubble leading to the worst financial crisis of the millennial, still stood relatively steady over the past 11 years.
The FX market is oozing optimism to say anything about the trend which could be directly associated to the unprecedented financial climate and the looming atmosphere of recession and financial crisis pushing people towards adopting a new income stream. As conventional income channels come to a dead stall and people having time and focus to spare towards trading, the large volume of cumulative accounts could be further expected to extrapolate since price volatility and unexpected events both in the trade and world affairs have had a conducive effect on even the layman to dip into the trading cycle: FX market being the coherent choice due to safe commodity and currency investments and quick gains.
Exacting one’s mind towards the milestones achieved this year, be it the plunge of global oil prices to the negative scale of the exchange or the sharp fall and sudden rise of DJI or even the injection of one of the largest stimulus packages in the United States since the infamous financial crisis, this year marks the focal point of risks and opportunities. The prospects of a new vaccine are still trailing to the second quarter of 2021 despite some countries picking up the pace to vaccinate early means the trend in the market is not short term unless a breakthrough is imminent. On the market front, the interest rate crunch with UK expected to nudge the rates in the negative along with global relief to debt financing, traders have a global ticket on both the borrowing and the lending front to turn up abnormal gains. However, reliable brokers are a tough nook to find since the uncertainty also grips the traders regarding investments in the skewed conditions as such. Moreover, with naïve traders entering the market, small scale brokers clustering the exchanges and limited physical interactions due to social distancing protocols are all but exhaustive factors that could easily deteriorate the growing trend and bring about a financial crisis much sooner than expected if not regulated efficiently.
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