Transcript of the podcast
Hi I am Arjun Parthasarathy speaking and this podcast is on “The Ordinary Individual is now driving Financial Markets ”
The British voter just made the Fed postpone policy rate hikes, driving down bond yields, lowering equity valuations and causing volatility in currency markets. Even as global policy makers talk about the negative effects of Brexit, the individual voter will vote on the basis of what staying in or going out of the EU will mean to his or her life in Britain.
Last year, Greece went to the polls with a referendum on whether to stay in the Euro or not. Financial markets saw high volatility on possible Greece exit of the Euro. The Greek voter voted to stay in the Euro but that was not based on providing relief to markets but based on the consequences of going out of the Euro to the individuals life in Greece.
India in 2014 saw the voter give clear majority to the ruling NDA. India was going through a very tough economic period with high deficits, high inflation, falling currency and weak capital markets. The voter voted for change and that helped markets recover.
In the Eurozone, citizens of countries such as Spain, Portugal, Italy, Greece, and France are facing hardship as their governments are on austerity drive brought about by their high debt levels. There are periodic protests by the citizens and with youth unemployment at high levels the protests will get louder. The Eurozone could face issues of stability on continuing protests and call for removal of austerity. Eurozone instability would cause markets to turn highly volatile.
The US is going for presidential polls this November. The Republican Nominee Donald Trump came in against all expectations and has promised an upheaval of the US financial system if voted to power. Here again the US voter has voted for Trump to be nominated and would again vote for or against Trump based on the way the individual looks at how the vote would affect his or her life. Markets may turn volatile if Trump start leading in polls but that would not change the way the voter will behave.
Financial markets are seen as institutionalized with large players such as Hedge Funds, Mutual Funds and Investment Banks dominating the market. However, the fact is that increasingly markets are being driven by a collection of ordinary individuals who take a decision on what affects their lives for the better.
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