July US Retail Sales Disappoint – Are Financial Markets Vulnerable to a Weaker Economy?

Financial markets participants were caught by surprise when the July US retail sales figures were released, and analysts started to question whether the economic recovery can continue at the same solid pace. The combination of waning fiscal support and rising COVID-19 cases seem to be having an impact on consumer behavior, as the numbers suggest.

The major stock market indices in the USA are trading near record levels and the US Dollar has been rising on the back of taper expectations by the FED, which creates an environment where asset prices are vulnerable to setbacks especially if the overly optimistic economic expectations aren’t met in the months ahead.

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Consumer demand in the US cools down

According to the Wall Street Journal, US retail sales fell 1.1% MoM, on the back of weakening demand for autos, clothing, sporting goods and furniture. Spending accounts for two thirds of the economy and any data miss can have a negative impact on asset valuations, as has happened once these figures were released.

In such cases, online traders need to adapt quickly and make sure their broker is well-suited to provide competitive conditions, including accurate execution, tight costs, and optimized software. One of the brands that have been gaining momentum recently is Axia, a regulated brokerage specialized in CFD trading.

Source: Photo by Adeolu Eletu on Unsplash

Traders are pleased to see Axia covers different markets for diversity, including currency pairs, stocks, indices, commodities, and other CFDs. That means its customers can build a portfolio or spot some of the most active assets each day, which is where trades with a high probability of success can occur.

Could online trading behavior change?

A lot of attention is being given to US stocks and the Dollar, especially recently when major indices retraced from record levels on the back of rising worries related to the pandemic. Since the market has been pointing up for more than a year without any major pullback, a maturing trend and weakening underlying fundamentals are not favorable factors moving forward.

When working with a broker like Axia, traders can either buy or sell-short on any of the instruments covered, able to take advantage of both bullish and bearish conditions. It allows for margin trading via tailored platforms like AxiaTrader and AxiaTrader Mobile, two solutions developed in-house by the company.

Uncertainty equals higher diversification needs

The path ahead for global stock markets is uncertain. Emerging markets indices have already peaked and only developed ones are managing to hold their ground decently. In an interconnected global economy, negative ripple effects can occur and catch overly-confident traders with an upside bias off-guard.

Axia encourages traders to constantly educate themselves and make informed decisions since that has a major impact on their personal finances. US retail sales figures show that the economic recovery could encounter significant bumps along the way and financial markets might start to price in that as well. Interest rates are expected to remain low for an extended period, which puts a bid under equities, but that does not exclude corrective moves down the road.

By Taylor Wilman