5 Macro Trends Driving Your Portfolio Right Now

A multitude of factors will affect how much return you get for your investments. Your ROI can improve if you understand what macro trends may work against you building your financial portfolio.

1. We’re already in WW3.

The United States, China and Russia have their reasons for providing humanitarian aid to Ukraine. Usually, an interest in another country isn’t always totally selfless. Most countries have something they want to gain from the situation.

In any case, the Federal Reserve reports that the United States Dollar (USD) is the world’s dominant reserve currency. However, recent updates state that its value may be plummeting. The Dollar Reserve is under threat, and this may affect the rest of the world – just like in WWI or WWII.

2. The Fed is a weapon.

“The Fed may do whatever it takes to save the US from inflation. But the cure may be worse than the ailment for the rest of us,” says Marcus Ashworth in his Bloomberg opinion piece.

The Feds plan to raise interest rates at least one more time before the end of 2022. The amount they propose is 1.23 percent more than what it was in September of this year. There’s talk of interest rates being as high as they were in 2008, during the recession.

You may see differing opinions about what the interest rates would do to the economy. For the short-term, raising rates may help. In the long-term, it can lead to disaster. It can have a raunchy effect on your financial portfolio, but it doesn’t have to if you remain frugal even when investing.

3. It’s the end of the Big Debt Cycle.

As much as the U.S. is in debt, it’s probably a miracle the country hasn’t gone into default. Many countries have jumped into that vicious cycle, though. Some have never been able to repay money owed to other countries.

Rises in interest rates and inflation all around probably don’t help much. The stock market crisis, rising fuel and living costs, and spikes in medical care expenses may contribute to the Debt Cycle. The end of the Big Debt Cycle doesn’t have to be the default. However, that’s what it also means sometimes for consumers.

Maybe you’re in debt, and you think that investing will get you out of it. However, you must make sure you manage the money you have before “going broke” again.

4. Energy & inflation are severe constraints.

Energy scarcities often drive up prices everywhere. Add random printing of money to that, and you have a reason for a disaster. That’s what The Federal Reserve, America’s central bank often does, however. They add to the financial chaos by printing more money.

The Federal Reserve is the only one allowed to legally produce tender notes for use in buying and selling. However, it’s almost as if you might as well write a money amount with a dollar sign on a piece of spiral notebook paper and hand it to a clerk. What’s the difference, nowadays, as of 2022?

5. The global search for a new reserve asset is on!

The struggle has probably hit other places in the world harder than the U.S. Many countries no longer have government bonds that provide extra financial security.

The U.S. does still offer government bonds. The U.S. Treasury sells them at auctions throughout the year. However, they may not provide the return you’d expect because of the rise in interest rates and inflation.

If you buy foreign bonds, the risk is probably even greater. You’re in trouble if that country goes into default. You may not see a dime of your money. Now, the world has to think of an alternative financial safety net. So do you.

What is the world going to do now?

The 2022 Ukraine War isn’t helping much. Invest wisely, and watch out for major financial pitfalls while working to build your investment portfolio.

Besides, you can always count on economic history to repeat itself anyway. Try to learn from that as much as possible, and be careful where you put your money.

FAQ

What factors may affect the ROI on investments?

Multiple macro trends such as political conflicts, interest rates, debt cycles, energy scarcities, and inflation can significantly affect the return on investments.

How is the situation in Ukraine affecting global finance?

The tensions involving Ukraine, US, China, and Russia, coupled with the US Dollar’s potential devaluation, can potentially impact the global financial stability.

What role does the Fed play in the US economy?

The Fed, or the Federal Reserve, plays a huge role in managing US inflation rates. Its decision to increase interest rates can initially be beneficial but can lead to potential long-term disasters.

What is the Big Debt Cycle?

The Big Debt Cycle refers to the accumulation of national debt, which could potentially lead to default. The rise in interest rates, inflation, and spikes in various essential expenses contribute to this cycle.

How do energy scarcities affect the economy?

Energy scarcities often lead to price increases everywhere. Additionally, measures by entities like the Federal Reserve to print more money could potentially lead to financial chaos.

Why is there a global search for a new reserve asset?

With many countries losing government bonds that provide extra financial security, coupled with rising interest rates and inflation, there is a global effort to identify alternative financial safety nets.