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Market Concepts Certificate Notes

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5 views

Market Concepts Certificate Notes

Uploaded by

satinacarliss
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Economic Indicators

-​ 8% compounded annual gdp growth for world gdp (2 trillion in 1964 to 85 trillion 2020)
Essential Economic Indicators
1)​ Economic Growth
-​ Market value of all final goods and services produced in a country
-​ Investors want to know the percentage of real GDP growth from year to year
2)​ Inflation
-​ 2 main inflation data sources: Personal Consumption Expenditures (PCE) price
changes in consumer goods and services + Consumer Price Index (CPI)
representative basket of goods and services (typical present spending habits of
country)
3)​ Unemployment
-​ Increases in unemployment depresses GDP growth
-​ US is primarily consumer dependent, more unemployed = less spending
-​ Nonfarm payrolls: number of jobs in the private sector as well as the government
agencies (includes construction, mining, gov)
-​ NFP released 1st friday
4)​ Business Confidence
-​ ISM Manufacturing Index (>50 optimism, <50 pessimism) (PMI/Purchasing
Managers’ Index) monthly of prior month
5)​ Housing
-​ housing=purchasing of construction materials = consumer spending/growth

Monitoring GDP
-​ WECO of target country shows chronological economic indicators

Timeline of Economic Indicators


Surv(M)/predicted median exceeds Actual = negative (opposite is positive)
Monthly: PMI, NFP, Housing, Inflation, CPI
Quarterly: GDP

R (relevance) - shows the amount of times investors searched


Surv (M) = analyst forecast

ECOS function in terminal - shows each firm and how surv was calculated
Diamond shows actual number

ECFC (economic forecasts function)


ESCU (economics surprise monitor) - 40 hand picked indicators
Surprise = aggregated of all indicators to create bloomberg us economics index

Terminal Functions:
NH (real time scroll of news functions)
ECST S (economic data with context and customizable graphs)
ECFC (economics forecasts function for trends in global economies/gdp growth)
GP (price chart to identify trends and market patterns)
WECO (shows economic calendars, events, and releases by country)
ECOS (provides full details behind economist estimates for calendar releases shows each
specific firm)
ESCU

Currencies

ECTR function (relevant trade flows between countries)


Exports (inner rim) imports (outer rim)
Function FX24 shows this
FXCA (currency conversion function)
Who trades currencies?
1)​ Financial Investors - buying and selling securities in foreign currencies
2)​ Corporations - goods and services in international markets
3)​ Travelers - personal use exchange
PEG function (PEG) - shows pegged (fixed) exchange rates in accordance with other countries
-​ FX reserves - cash to manipulate supply of and demand for currency
-​ Raise interest rates (increase to raise demand)
Usually in USD pegged because it is the most liquid currency (sometimes euro)
Currency codes (FXTF FX ticker finder): highlighted currencies are 1 base for x currency,
non-highlighted is x currency for 1 base
FXC function (currency matrix) - shows how much of left needed to buy top currency

Triangular arbitrage - neither makes nor loses (divide, multiply multiply)


1971 us suspended gold conversion window

Trade Weighted function (USTW$ Index) - common trade partners given more importance)
Law of 1 Price - price of good should be same internationally (Purchasing Power Parity shows
under or overvaluing of a currency)

3 main currency valuation drivers:


1)​ Surprise changes in interest rates (increase in ir, increase in bond yields, increase
foreign investment, strengthen currency)
2)​ Surprise changes in inflation (increase in inflation weakens currency)
3)​ Surprise changes in trade (net exports positive trade surplus increase demand, net
exports negative trade deficit diminishes demand)
IFMO (world inflation monitor)
FDTR Index (Federal funds target rate)
Abenomics - to halt the vicious cycle of deflation

Inflationary Cycle - workers expect prices to increase>workers demand pay raises>company


wages go up>companies raise their prices
Deflationary Cycle - prices decline>consumers defer purchases waiting for lower
prices>company revenues decline>companies let go of workers to cut costs

TPX Index (TOPIX) - market cap for tokyo stocks


Repatriate - send back to own country

Tools to assess currency risk:


1)​ Historic volatility of currency pair values
-​ FXFM (FX Rate Forecast Model) - illustrates the chances of certain currencies in a
selected future (high volatility = wide bell curve)
2)​ Analysts forecasts of currency pairs
-​ FXFC function (FX Forecasts) - top number main currency bottom 2nd comparison
-​ Avg of investment analysts teams forecasts
-​ FRD (FX Forward Calculator) - forward exchange rates for a selected currency pair
-​ To hedge - reduce risk/ speculate - seek risk
Gold: non-yielding asset (no dividends or interest)
XAU Curncy (price of gold)

Fixed Income (Bond Market)

SRCH (Fixed Income Search)


BUDG (US Federal Budget)
-​ Budgetary outlay/gov spending (orange line), tax revenue (white line)
-​ orange above white = deficit, white above orange = surplus
TSECTOTL Index Treasury Securities = total amount of US debt according to the federal
reserve
DEBT Sovereign Debt Ownership (who owns us gov bonds)
WIRAWRLD Index

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