It’s been a wild and crazy ride for investors this past week as U.S. stock prices fell, interest rates spiked and the VIX volatility index blew up.
Stock traders continued to struggle with large intraday ranges in the Dow, which swung from gains to losses in rapid succession. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all dropped roughly 8 percent from all-time highs and thus erased their astonishing 2018 gains. Similar losses were seen around the globe with the Shanghai Composite Index, Hong Kong’s Hang Seng Index and Japan’s Nikkei Stock Average all down.
Overall, investor sentiment seems to point to the realization that volatility’s return with a vengeance is overdue following last year’s relatively calm market and 2018’s great start. To what extent investors will remain cautious and on edge following the recent market decline remains to be seen. However, the safe bet is to assume that more turbulence is ahead. And with this in mind, many are seeking to re-balance their portfolio to include more traditional “safe haven” strategies.
Currencies and the FOREX market represent one investment opportunity that is non-correlated to market volatility. Although 80+% of retail currency traders lose money, the professional 20% manage extremely well in volatile markets. Evidence of this includes the macro performance results following unexpected geo-political and/or monetary policy making events such as the British pound sterling’s price drop after Brexit and the Swiss Central Bank’s removal of the Franc’s peg to the Euro. In both instances, smart currency traders were prepared with the proper risk management strategies and sophisticated trading systems in place.
It is important to understand how currency pairs trade and the impact that volatility might have on global Forex trading. Currency pairs quote the relative value of a currency unit against the unit of another currency in the foreign exchange market and the pound sterling, Euro and US dollar are among the most traded currencies in the world. In volatile markets, Forex traders that trade currency pairs have the potential to see sustained declines in the value of one currency against another and therefore preparation for this type of event or any unknown potential threat is therefore critical.
At Mediatrix Capital, for example, we have increased our risk capital margin and look at the upside and not the downside of volatility. Therefore, whatever market scenarios transpire we are able to sleep well at night with the knowledge that our strategy is based on an investment philosophy that emphasizes portfolio construction with an asymmetric return profile and definable downside risk to capital invested. Low equity use, 30 currency pairs to trade, and a very defined defensive strategy in addition to being absolutely unbiased to market direction are key factors paramount to the success we have generated for our clients over the last four consecutive years.
For further information, visit www.mediatrixcapital.com or call 1-800-905-1006.
In no event should the content of this material be construed as an advertisement, express or an implied promise, guarantee or implication by or from Mediatrix Capital Inc. (MC) or any of its partner or subsidiary companies. This is not an attempt to sell or solicit any security and should not be taken as such. The content of this document is for informational purposes only. Potential Accredited Investors are advised to carefully read the Disclosure Documents to determine whether a managed investment in MC is consistent with their financial situations and investment objectives. Past results are no guarantee of future performance. Mediatrix Capital is a foreign corporation based in Nassau Bahamas, and does not operate within the United States.