While commodities were among the first assets to be traded on public exchanges, the irony is that this first market innovation should be resistant to the latest innovation: indexing.
espite the previous week’s strong GDP report and Friday’s strong payroll report, concerns of stubbornly low price and wage inflation combined with concerns of sluggish consumer spending and business investment led the FOMC to keep the Fed Funds target rate unchanged while indicating there is no strong reason to adjust rates either way.
Mental accounting is a truly defining feature of the human condition. We naturally sub-divide and categorize all sorts of events and resources, and not just with money either; it is a coping mechanism for our brains.
Thirty times rarer than gold, platinum occurs at very low concentrations in the Earth’s crust. There are only four countries in the world that have platinum mining operations of any significance and of these South Africa has the largest platinum resources by far.
A holiday-shortened trading week and mixed U.S. and weak German economic reports left U.S. stock markets unchanged and commodity markets lower despite continued U.S-China trade agreement optimism and stronger-than-expected Chinese GDP growth and industrial production numbers released on Tuesday.
While diversification may be one of the most common refrains in finance, the irony is that it is home to widespread misconceptions among investors, both novice and seasoned alike. Everyone intuitively understands the wisdom of “don’t place all your eggs in one basket” – such logic extends to everyday life – but investors often find themselves with far fewer “baskets” than they even realize.
What factors account for this discrepancy in diversification?
Initially falling early in the week on the IMF’s reduced global and U.S. economic growth forecast for 2019, commodity and U.S. stocks markets finished the week higher after strong U.S. bank earnings and Chinese trade and lending reports on Friday.