Vol 22 (2025) - Issue 4

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Deeper Capital Markets as a Long-Term Response to Market Volatility

Synopsis
The early part of 2025 has seen much volatility in the stock exchange, in result of, not least, geoeconomic conditions, but also slowing expected growth for 2025 2026 in the USA. The year to date has been also an unusually volatile year for foreign exchange movements, and especially traditional safe haven currency USD has declined in value vis-à-vis other major currencies.
Capital has moved to other highly liquid assets such as gold.
The textbook means to handle volatility in the markets include diversification by investors as well as central bank liquidity support. Instead to diversifying to raw materials, ideal would be for investors to diversify to other safe haven currencies, such as the Euro. It would also be desirable to have easier access to rebalance your portfolio with further geographic asset classes. For this we would need deeper capital markets outside the USA.