Motley Fool Money The Carry Trade, Nikkei, and Your Portfolio
Aug 5, 2024
Jason Moser, a Motley Fool analyst, delves into the impact of the carry trade with the Japanese yen affecting global stock markets, particularly the Nikkei. He shares insights on whether investors should heed Warren Buffett's cash positioning and offers advice on maintaining calm amidst market volatility. Lou Whiteman, a contributor, discusses Nike's struggles leading up to the Olympics, including declining sales and competition. They explore Nike's strategies for regaining consumer loyalty and how aligning innovations with customer preferences may steer the brand back on track.
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Yen Carry Trade Explained
- The yen carry trade involved borrowing cheaply in yen and investing in higher-yielding currencies like the dollar.
- This trade amplified Japanese corporate earnings, but is now unwinding as the Bank of Japan tightens monetary policy.
Market Impact of Yen Carry Trade
- The Nikkei suffered its largest single-day drop since 1987, erasing a year's gains.
- While U.S. markets feel a pinch, global markets experience more damage.
Portfolio Assessment
- Analyze your portfolio and determine if your businesses are fundamentally affected by macroeconomic events.
- Diversify your portfolio across markets and market caps to cope with market fluctuations.