FXCM Research Team

What Is The CAPE Ratio? The cyclically-adjusted price-to-earnings (CAPE) ratio is a variation on the standard price-to-earnings (PE) ratio that seeks to determine if stocks are in a bubble. While the more common PE ratio measures a stock or stock index's valuation over the next year or so, the CAPE ratio is calculated by using an average of corporate earnings over the past 10 years, adjusted for inflation. By using…

In 2016, Republican U.S. Presidential candidate Donald J. Trump built a campaign on a central theme of American prosperity through rebalancing foreign trade. To accomplish this goal, Trump proposed a complete overhaul of the North American Free Trade Agreement (NAFTA) and an intense review of U.S. policy toward China. Upon winning the presidency in November 2016, Trump's agenda was one step closer to becoming a reality. Throughout the Trump administration's…

Since 1788, every fourth year has brought an election for the Presidency of the United States. During such years, candidates from all walks of life dedicate their time, money and effort in an attempt to earn the highest American political office. While only a select few ever become the President of the United States (POTUS), the electoral process in itself is an institution. Presidential elections are often turning points in…

Historically, the outbreak of a rapidly spreading and life-threatening virus can quickly send global markets into chaos. Negative economic consequences are typically felt as trade and travel restrictions, as well as increased social welfare costs, spike investor trepidation. 2020 brought a harsh reminder of how devastating a viral outbreak can be with introduction of the novel coronavirus (COVID-19). Disease Outbreaks And The Markets According to the World Health Organization (WHO),…

What Is The Wall Of Worry? The "wall of worry" refers to a tendency in financial markets for stocks to rise in the face of seemingly difficult or insurmountable problems. It usually turns out, however, that these problems—though serious—are temporary and eventually resolved or able to be put off to the future. Generally, stocks are able to "climb the wall of worry" because many investors see potential problems as a…

What Is An Asset-Backed Security? Asset-backed securities (ABS) are fixed-income instruments similar to bonds that are collateralised by a pool of loans, the payments on which are channeled to the holders of the securities in the form of interest payments. When the loans are paid off, holders of the ABS receive their principal back. ABS issues are structured by a lender or investment firm using different types of loans. The…

As the world's largest financial market, the forex attracts millions of participants from around the globe on a daily basis. The result is a highly liquid, diverse trading venue that caters to the needs of retail and institutional investors alike. Whether you're a forex market newcomer or professional, the ultimate goal of active trade is the same: sustain consistent profitability. So, is it possible to actually make money trading currencies…

The relative values of international currencies play a key role in global finance. Three areas that are particularly sensitive to exchange rate fluctuations are intercountry trade, pricing stability and regional economic growth. In practice, governments and central banking authorities implement a collection of unique mechanisms to promote the stability of their domestic money. Central banks frequently employ devices such as interest rate adjustments, debt purchases and pegs to manage exchange…

Monetary Policy Versus Fiscal Policy Governments have two main ways to influence their economies: Monetary policy is the actions taken by a country's central bank to regulate interest rates, control the supply of money and the amount of funds banks must hold rather than lend to their customers. Fiscal policy is the spending and taxation policies of the government that can influence how much money businesses and consumers have to…

What Is A Reserve Currency? A reserve currency is a currency that is widely accepted around the world as a method of payment between countries for goods and services. Reserve currencies are also widely held by governments and central banks as foreign exchange reserves and to settle international debt obligations. Past And Current Reserve Currencies The U.S. dollar (USD) has been the primary reserve currency since the end of World…

What Is A Target Date Fund? A target date fund is a mutual fund designed for retirement that automatically rebalances the fund's assets as the investors in the fund draw closer to retirement age. In the years prior to retirement, the fund is more aggressive and heavily invested in growth stocks, but as the holders near retirement the fund becomes more conservative. At this point, its allocation shifts to include…