I don't normally follow the Euro Dollar. But last night, I was reading a blog on Zero Hedge. The blogger seemed very excited about the drop of the Euro below support. I pulled up a chart and it was true that support had given way. The Euro bounced and then fell even more by morning time in San Diego. Interesting.
Why should you as a TSP investor care about the drop in the Euro?
Well, it seems that the U.S. Dollar is getting stronger as the Euro gets weaker. And a stronger U.S. Dollar has dampened stock prices this year. Global markets are an ever changing puzzle. I also noticed a plunge in the Portuguese market today. Why should you as an investor in TSP care? Well, the drop in the Portuguese stock market shows that the market is not happy about the bailout terms of Irish debt. Investors fear that Portugal (and Spain) might be next, so people are selling Portuguese stocks.
If one had pulled up a chart of the Portuguese stock market on April 29 of this year, you would have seen a stunning sharp drop in their market related to fears over the Greece debt crisis. A week later on May 6, we had the Flash Crash.
My point is that markets are intimately related in this global era of 24-hour markets. When the Euro drops by a sizable amount overnight,you should take note. When the Portuguese market is dropping like a stone because of fears about debt contagion, the fallout might reach our shores within days. It is always best to be prepared for down drafts in the market.
People shrug off problems in Bull Markets. They become fearful and sell problems in Bear Markets.
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