Economic Outlook and Day Trader Opportunities
What is the Current Global Economic Outlook?
China’s faltering economy has been in the news for the past few months and continues to be a focus for many investors and day traders. Interestingly enough many Chinese companies who have actually experienced a loss have some of the highest-performing stocks. This seems to be contrary to common investment sense, but the logic behind this phenomenon is that those businesses are perfect targets for Chinese decision-makers who are looking for where they can reorganize manufacturing capacities that have actually built up beyond the current demand.
The result is that stocks have risen for such companies who may potentially be transformed into profitability through reorganizations supported by Chinese leadership. Although many Chinese companies are in this economic position, the challenge to investors is to determine which have the most potential to benefit from takeovers or mergers, and which of those may in fact materialize (many will not).
In the US investors continue to ponder the impact of the Federal Reserve’s looming increase of interest rates. One of the concerns for investors is not only when interest rates will be boosted but my how much, and how frequently. The most recent jobs report provided positive information increasing the probability that the Fed will indeed increase rates at least moderately at their December meeting, although the upside is that the news also removes some of the uncertainty for investors.
Consumers and economic analysts still fear that this action will have enough of an impact on mortgage loans, automobile loans, and consumer credit accounts that there could me a slowdown in US economic conditions. Increased cost of financing could be seen as generating a slowdown in consumer spending. The Fed’s outlook is that the US economy is strong enough to weather an increase in rates without significant negative impact.
What Does the Economic Outlook Mean to Day Traders?
China’s economic outlook is not promising overall for the short term. Many US investors in fact have reduced their holdings in Chinese stocks. But the possibility of gains for day traders still remains due to moves by Chinese policy makers to consolidate capacity that makes some stocks attractive investments.
Volatility in Chinese markets and individual stocks may be made-to-order for day traders as transformation of companies experiencing losses can lead to significant jumps in stock prices. These investments are not without risk since it can be difficult to identify the companies who are likely to benefit from reorganizations or takeovers. Such investments are definitely not considered a buy-and-hold target but could prove of value for day traders.
US investors are proceeding with caution with a wait-and-see attitude regarding the Fed’s decision on interest rates and details of the actions taken. Economic conditions still contribute to optimism and increased consumer spending – at least for the short term.
Keeping an eye on economic news will be an important activity for day traders’ strategy in selecting opportunities that are right in current conditions.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.