What factors had the greatest impact on financial markets in 2018

The main economic theme of 2018 was trade wars unleashed by Donald Trump’s attempt at resolving the problem of the US huge trade deficit, which reached $566 bln in 2017.

The Federal Reserve System and other central banks continued their planned tightening of monetary policy. At the same time, the Fed not only raised interest rates three times in 2018, but also began to reduce its own balance: the regulator’s assets have decreased by $360 bln since the beginning of the year. Next year, the total balance of the world’s monetary regulators will shrink by $200 bln, for the first time in the last decade.

US sanctions against Russia. In April, the first large public companies, Rusal and En +, were put on the SDN List. This provoked a domino effect on the quotations for almost all ruble-denominated assets and sent the RTS Index down by more than 10%.

Exchange crisis in emerging markets. Most world currencies fell against the US dollar, by 2-5% in developed countries and by 5-15% in emerging markets. The yields on US bonds rose, which caused an overflow of investors from low-interest countries into the American market. American corporations that had been hiding offshore revenues began to repatriate their funds back to the United States, which also strengthened the dollar. Another important factor was trade wars. It is estimated that trade barriers will reduce global GDP growth by at least 0.5% pushing commodities’ prices down, primarily oil and metals, affecting the currencies of commodities exporting countries. China will mostly suffer from import-export duties, which are forcing it to devalue the yuan. The weakness of the yuan will be passed on to China’s trade partners.

Cryptocurrency collapse. One of the most optimistic trends of 2017 turned a real disappointment for investors in 2018. Over the year, the Bitcoin exchange rate fell by 76%, from more than $ 14,000 to less than $ 3,500 per unit.

However, a lot of ICOs have taken place over the year. The first national cryptocurrency, the Venezuelan Petro, has been established in expectation to overcome the economic crisis and attract billions of dollars in investment bypassing the US sanctions.

Previous ArticleNext Article