Written by 1:09 pm abroaden weekly insights

WTF x AWI #081 – Stocks go down, stocks go up

stock market up and down

This is issue number 081 of our WTF is going on with the Economy newsletter, giving people living abroad everything they need to know about investing and economics. 

Here’s what we’re reading this week. 

The stock market goes down (and then back up)

Over the past week, stock markets worldwide went for a ‘thrilling’ ride. 

The American S&P 500, Dow Jones 100, Nasdaq Composite, and the European Stoxx 600 saw significant dips followed by a fast recovery

A few factors are driving this roller coaster. 

  • Inflation fears. With inflation still high (for now), central banks will raise interest rates to cool off the economy. Riskier stocks are less attractive since there’s less return for the same risk when that happens. 
  • The economy is shifting into another phase. Investors are optimistic that omicron will signal the end of the pandemic (🤞), and consumers will change their spending habits. 
  • Potential conflict in Ukraine. Tensions between Russia, Ukraine, and the West are at historic highs. If war or a minor conflict breaks out, that could spell economic disruption. It’s worth remembering that Russia is a major oil and natural gas producer, which are the two commodities driving price inflation right now.

Before panicking, it’s helpful to remember that markets go through these sorts of corrections all of the time. It’s how our economy works and doesn’t signal impending doom.

We’re witnessing a shift in the economy where investors believe consumers and businesses will demand different goods and services. 

(We actually saw this cycle before in May of last year. At the time, we thought the pandemic was behind us. Oops).

At the beginning of the pandemic (and really, throughout it), tech companies were the shining stars.

That made sense; we weren’t out consuming services while in lockdown but were instead wholly dependent on tech to keep our lives going. 

Further, tech companies are what investors call “growth” investments. These firms don’t aim for profitability but instead spend a lot to be sustainable later.  

Investors like them in economic downturns as they usually drive recovery. With the economy shifting gears, other more stable industries will come into favor.  

Many of these firms are already profitable (“value” investing), which means dividends for shareholders at times when growth struggles.

Intelligent investors recognize these cycles. 

Even smarter ones avoid playing them. We talk about them a lot, but ETFs and other investment funds do a fantastic job cushioning the blow of market dips thanks to built-in diversification. 

That way, you come out on top without losing your mind.

Bitcoin crashes (and doesn’t come back up)

Speaking of crashes, everyone’s favorite cryptocurrency also plunged over the past week.

Unlike stocks, bitcoin and other cryptos have yet to recover. 

In short, investors think that many cryptos are in a bubble. Given that there is no (direct) underlying value in them, it makes sense that investors leave it when stock markets also drop.

What’s more, there are calls for the EU to ban bitcoin mining in the name of climate change.

In short, bitcoin uses a resource-intensive blockchain to record transactions. It’s well known that this sort of work consumes more energy than a medium-sized country. It’s not surprising that cryptocurrency would become a target in this regard.

Also, if you needed a sign that BTC is a terrible inflation hedge, here you go. 

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Swiss Franc gets on the gain train. 

The Swiss Franc is hitting highs not seen in seven years.

Fears over the Ukraine conflict mentioned above are sending investors towards the Alpine confederation’s currency for a safe haven. 

If you’re working remotely for a Swiss company, congrats; you’re getting a de facto pay raise. 

If you’re about to go on a ski holiday in Switzerland, well, you might want to eat that fondue at home instead of out on the slopes. 

The real way people living abroad can make their retirement money work for them.

We all know that saving and investing for our retirement should be our number one financial goal. 

But, do you know how you can make that money work for you forever? 

If you don’t, it’s okay!  

Most people have no idea that, once you retire, you should be turning your retirement fund into an endless wealth fountain and not a rapidly-depleting reservoir. 

Our latest blog post has everything you need to know

Some slick abroaden PR

Late last week, an interview with us hit the presses. 

Curious about where we came from and where we’re going? 

Check out this insightful read on beststartup.eu

The mismatch between digital nomad visas and the needs of remote workers

If you’ve been reading us for a while, you know that we like talking about digital nomad visas and other incentives countries use to attract foreign workers. 

(It makes living and working abroad that much easier, which we love). 

We recently read this article explaining what Malta and other countries are getting wrong regarding their digital nomad programs. 

The argument goes that digital nomads don’t have a need for visas. Instead, what they want are:

  • Flexible accommodation 
  • Coworking spaces and other places that facilitate community.

The author argues that the visas countries create for digital nomads are more suited for longer-term remote workers who will need residence and access to local public services. 

Having spent tons of time in coworking spaces ourselves, we think the author makes a valid point. 

What do you think? 

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