Various markets around the world are fertile ground for contract for difference trades, so predictions about price movements are always of interest to CFD investors. Although some see Wall Street and other major international exchanges as part of the older systems of market trading, not everyone who buys into stocks and shares or the other assets they deal with is looking for a ‘buy and forget’ style of investing.
Savvy CFD traders know that there will always be options for taking a position on any number of stocks, commodities and bonds, and that’s why general market trends are always worth taking into consideration. With many traders and strategists already bracing themselves for a period that could prove to be very volatile indeed, some are asking whether March will be a truly make or break month for this year. As well as various earnings reports and official data due which will point towards how certain stocks and shares are likely to move in the near-term future, two major international issues that have been sending ripples across the markets are moving towards their end game.
US and China
Two major considerations for global and international trade have been dragging on for some time now, namely the UK’s withdrawal from the EU and the trade war between the US and China, and both are coming to a head. Randy Frederick, Vice President of Trading and Derivatives at Charles Schwab, has said that March will be “a pivotal month” as geopolitical issues take center stage.
March 2nd is the next deadline for an agreement to be found between the two largest economies in the world. Beijing and Washington have locked horns over trade and used tariffs aggressively against each other, with President Donald Trump still threatening to impose higher duties of 25% on $200 billion worth of Chinese imports that are currently only subject to 10% tariffs.
Larry Kudlow, White House National Economic Council Director, recently stated that a “pretty sizable distance” still remains between the two countries. This has caused further jitters amongst investors who are growing tired of negotiations that have lasted over a year and have yet to provide any real solutions. Issues such as intellectual property rights and access to markets are very real concerns for many companies.
Chief market strategist at National Securities, Arthur Hogan, has been quoted as saying: “Trade for sure has affected the global economy more, and a lot of corporations and economic decisions have been postponed until we know what the lay of the land is.”
“We’re going to see sideways action until we start to have those catalysts resolved in March”, he added.
The other big geopolitical factor that is currently scheduled to hit home on March 29th is the severance of the UK’s current ties with the EU. Currently, there is still no agreement on a post-Brexit deal and recent developments have made the situation even more confusing and the outcome harder to call. Without an agreement in place to set out the future relationship between the UK, which is the fifth largest economy in the world, and the 27-nation trading bloc of the EU, economic problems in various European states could escalate quickly.
For CFD traders, this isn’t all bad news, as price fluctuations up or down will provide plenty of opportunities to take positions and make money. However, the volatility of the present situation in terms of Brexit makes it difficult to predict how forex markets will react and how that will affect other markets due to international relationships between companies, commodities and product sales. With so much division evident in the domestic political UK scene, it is hard to know what, if any compromise will be found, whilst at the same time many forces are actively taking opposing sides as to whether Brexit will be ‘hard’, ‘soft’ or even happen at all.
A general slowdown of growth forecast by everyone from the Bank of England through to the IMF and already showing through in Q1 earnings forecasts from major US corporations illustrates how many factors are in play that could make March such an important month.
If another meeting does happen at high levels between Washington and Beijing, the trade war picture could change for the better very soon. If talks become even more protracted, the effects on company profits and consumer spending could be deeper than currently imagined. In Europe, there are still so many different permutations and possibilities that could be thrown up even at this late stage of the Brexit process that it really is impossible to make long term predictions.
Again, this makes CFD trades even more interesting for many, as the twisting storylines of the news headlines each day puts a different spin on what might be about to happen. However, everything does point towards next month being a pivotal period that could set out how the markets will behave for months to come.