Does currency exchange play an important factor in index performance?
I was comparing Nifty’s (India’s stock market index) performance with the S&P 500. The S&P 500 is down 17.7% (in USD) in the last 1 year whereas Nifty is down 4.7% (in INR) This might give the illusion that Nifty is significantly outperformed the S&P 500 but can we simply ignore the fact that the Indian rupee has lost 10% of its value in the past 1 year? If we include that then the Indian index would have lost 14% of it’s value. By the same logic, the German index- DAX has lost 21% against the Euro and the Euro has lost 17% against the USD, does it mean that the DAX is down 35% its value? I might be wrong but I don’t hear anyone talk about it.
Yes, currency matters. At the end of the day, your earnings are tallied in local currency. That is how stocks are priced
Keep in mind , US dollar is the passenger but not driver
lol … you have no idea about dollar.
LOL, You have no idea what I mean The dollar's exchange rates are at present a consequence of interest rate differentials, expected monetary policy paths, and risk aversion.
Yup, the effect of currency devaluation will + or - your real returns depending upon the underlying currency fluctuation
No the DAX has not lost 35% of its value. People in Germany don’t give a shit about euro devaluated vs the us as long as they don’t travel to the us… If you’re an international investor then yes FX compounds over performance in local currency So the strong usd is creating a buying opportunities for us investors abroad and we don’t talk about it
This is true … imagine all your business loans wipe out due to the raise of dollar
I don’t think a person whose name is “gym bro” is the best person to take financial advice from. Anyway, energy prices continue to be priced in USD. And energy prices are the most important factor of inflation which will be a negative factor in real returns of the stock market.
From the UK, for some reason this post hurts more than it should. High inflation is not enough, they had to fuck up the currency as well. Fml 30% down vs dollar in 1y. Might as well join EU and adopt the euro to spare the embarrassment
You’re not welcome back in the EU honey
That's fair, the wankers who voted for brexit have to face the consequences now. I will move back to the mainland soon enough. Nevertheless the new gov act as they were elected, and I thought BoJo was the worst that could have happened...
Weaker the currency, stronger the stock market. For India, companies have contract for X dollars but in INR terms now they are making more.
there’s always some guy talking about how exports are benefiting from dollar strength. mfer everything that we imported has just increased in price. increased prices, lower disposable income. lower disposable income, lower spending. aka weaker stock market.
India is net exporter and when currency falls, it attracts more buyers and creates positive feedback loop.
Yes, you’re right and companies talk about it in their earnings calls all the time. They say “strong/weak dollar”.