Original subtitles

and P 500 makes positive gains over the many years. Here for

made a slightly positive gain. Um but USD had big divergence

the short term. So you must understand the global economics

synchronized growth like China and the Eurozone. So whereas at

to decrease in price as well as we started decreasing S and P

that will give us a clearer and better understanding of the

500 index and the DXY. Um during COVID lockdowns there

investment was going into the Eurozone. In 2017 we saw global

other currencies were not doing the same. Now that's mainly

general rule to the correlation. Particularly in

flows where capital and investment is going into and

investments such as into indexes and of course from what

means is whilst USD was increasing in price. Lots of

you know started to deflate at that time it's called reflation

market particularly long term anyways guys that's it for the

00 and DXY. So the takeaway lesson from all of this is

actually no set rule of what you may see in the short term.

riskier investments are not preferred hence why stocks may

about investments into that country and how it affects

example during COVID lockdowns back in June of twenty twenty.

are people seeking their safe havens? Where they seeking that

positive correlation between the S and P fivehundred and

stock prices and everything like that but in terms of the

because the Fed had one of the first we won't call it

example I see a direct correlation particularly on the

logically thinking the investment at the time. Lots of

learnt about constant ease in and then the lesson afterwards

lower time frame but when it comes to the stock market and

lower time frames you're not really going to see this as a

yield market and DXY for example. So what you must

logical. As bond prices go up interest rates go down. The

500 USD should also rise at the same time as well. Times when

understand about S and P 5hundred and DXY. There is no

the time in 2015 where we saw DXY massively increase because

was a complete inverse correlation between S and P 5

asset classes. Which one makes sense to perform better? Where

bond purchases there's never actually really been a

following suit after this after what they happened and what

So where as if we look at you know Euro USD and DXY for

there's this correlation because you've got to think

program. But USD had a much more successful one. Therefore

successful one. It's always gone on quantitative easing

course consider this long term understand where money actually

500 increases and grows so does so does DXY however this isn't

500 so good gains now this is the point that I made in the

This was I believe on a on a four hour chart between S and P

slows down. Therefore US increases because safe haven

So what happened then? The dollar increased because it was

easing program. So if we if we think back to that where we

first lesson of the asset class correlations I hope this will

positive correlation now as you can see over time as a S and P

where we talked about how tapering occurs. This is

at the time and look for the movement of money into certain

better yield? Are they seeking an investment for a hedge

the US dollar we don't see that direct correlation but of

the Eurozone. Another thing as well, the dollar doesn't like

downside because of mainly the strength into USD and also

suffer a bit during these times. But ultimately the the S

all the way up as seen by this orange line over here. Stocks

against inflation for example. Now during times of crisis

You can also see on at that time Euro USD saw so much

of the US monetary policy. Two years later on that's when we

reflation. Um so what you tend to see is as a dollar really

they led. Um China started to get stronger as well especially

beginning over the last 20 years there's been a 40%

direct correlation as compared to what we may see in the US 10

and demand appeal. Slow down in trade slows down USD liquidity.

always see a rise in the stock market. We've got 2008 crisis.

then the stock market is in orange let me just check that

USD is a safe haven in these times so risk assets like

always the case you've got to understand that long term

higher returns on the investment as well therefore

it had a massive divergence from other global currencies.

translates into the US dollar

it goes back to how it was that's when the dollar started

started to see a lot of the the other global economies

completely successful tapering plan because if you actually

divergences from global currencies. Um so what this

tapered back constant easing. Therefore the US dollar boosted

market. So as we can see the stock market is always we

people investing into the US economy therefore not as much

yield goes down too. As bond prices go down, interest rates

look into the history of tapering and slowing down the

treated like a safe haven and stocks went down at that time.

exactly what happened. Um in twenty fifteen the Fed actually

we've seen the bond market. Now just actually looking at the

In twenty fifteen the Fed tapered back the quantitative

therefore as more investment happens into into the S and P

what we got here is the dollar is in blue I believe it is and

10 yield also strengthens. Um and also instead US ten US ten

stocks decline as investors would much rather go for safer

does that have firstly on the bond market and then how that

real quick No the the orange is DXY and blue is the stock

asset class correlation between the stocks and the dollar. So

DXY. Because of foreign investment they invest into the

you've got to think about it like this you you always must

there there's immense global uncertainty international trade

US stock so they need to exchange money into USD

understand where is investment going into and then what effect

Now over the last 20 years there's been a 40 percent

there's more investment into the country now this is

it ranges, there's different maturity dates. Now the

correlation that you've got to understand is usually when

simply just declines. The reason for this is quite

So the second type that we're looking at is the stock market.

of price moves. You start to see that as DXY strengthens US

interest rate environment means a higher return on the bond so

bonds for example 3 month bonds, 30 year bonds, you know

something that you guys should understand until now because

go up, the yield goes up too. Now think of this. The higher

in the yields. You understand that there's of course two year

there's big news events that leads to these different types

understand from treasury bond market that means the US ten

the US ten yield of course we've learned about the bonds

market and then commodity market. In this first lesson

stocks. Then of course we had the bond market, the currency

classes. So that was mainly the equities markets which is bond

we're going to be looking at stocks and bonds. So let's

start off with the treasury bond market. So as you

we looked at the various different types of asset

first videos that we did in the first section of fundamentals

especially but we're going to be looking at the asset class

correlations. So if you remember back to one of our

that I've been getting you know as request from my students

So guys this is probably in one of the most anticipated videos

make sense and I'll see you in the next video Yeah.