The American economy has an influence on your investments, how come?
The American economy has an influence on your investments, how come?
So how can America's economic conditions affect the domestic market?
COVID-19, which has hit the entire world, has also disrupted the economic stability of the United States. This condition forces financial policy makers to roll out various economic stimuli to prevent deeper economic weakening. For example, recently the governor of the American Central Bank, the Federal Reserve, announced a new policy direction, where they will keep American inflation above 2% in the future. Therefore, the Federal Reserve will keep its benchmark interest rate low for a long time. If this works and inflation increases in America, then this will be a good thing. Especially in America, rising inflation indicates that demand from society is also increasing, thereby encouraging the American economy to improve.1
By keeping the American economy moving, countries with large trade relations with America can also benefit. For example, Indonesia exports a lot to America, so the effect will also be positive on the domestic economy & financial markets. With the largest economic pie in the world, increased economic activity in America will ultimately benefit many countries that have trade relations with Uncle Sam's country. This is also a positive catalyst for domestic market movements.
Currently, economic stimulus from America has made the American capital market S&P 500 experience a significant increase. This does have the potential to happen crashes and could have an impact on the Indonesian market, but it tends not to fall too deeply until it reaches its lowest level at the start of the pandemic.2
Is there a right way to invest in these uncertain times?
Under any circumstances, the best investment is to invest according to your risk profile. If your character is an aggressive investor, you can increase your share of stock mutual funds with the concept high risk = high return, while those of you who are more conservative can choose more stable money market mutual funds. Apart from that, it is best not to invest all at once, you can increase your investment consistently and gradually. With this consistency, your investment funds can continue to grow and get profitable returns over a certain period of time.
Source:
1 Katadata.co.id, Jaga Inflasi 2%, The Fed Beri Sinyal Pertahankan Bunga Acuan AS, 26 November 2019,
2 Investasi.kontan.id, Indeks S&P 500 dan Nasdaq Catatkan Rekor Tertinggi Sepanjang Masa, 24 Agustus 2020,
