The Whole World Impacts Investments
Investments don't exist in a vacuum. What happens on the U.S. stock markets has global consequences. Changes in the interest rates on U.S. Treasury securities can impact bond markets across the ocean. A downturn in the U.S. economy hits the rest of the world almost immediately. And the reverse is also true. Major shakeups around the world affect stock prices, bond prices, commodities, and currencies.
At the same time, the breadth of the world markets practically ensures that there's always a profit to be made somewhere. When major economies are tanking, emerging economies may begin to thrive. A natural disaster in one part of the world can cause the economies in other parts of the world to go into overdrive — or it can cause shortages and slowdowns, depending on the type and extent of damage.
In addition, the Internet has made the world a much smaller place. We now know instantly when something happens in the farthest corners of the earth. We know the second a stock exchange in Asia or Europe goes up or down a few points. Extensive international trade means the dollar can be affected when another country's currency strengthens or weakens.
And all of this affects investors. Whether you invest in individual stocks, fixed income securities, mutual funds, real estate, or more exotic financial instruments, your investments will feel the impact of world events — sometimes immediately, other times slowly. It used to be that only investors in foreign securities had to pay close attention to foreign and global economies. Now every investor needs to know and understand what's going on around the world, because every investor is impacted by what goes on in the rest of the world.