Even Bigger Than Bonds? Foreign Exchange (not financial advice, dyor)

It doesn’t matter, until it does. And you can be affected by this, whether you realize it or not. Foreign exchange is the largest market in the world: bonds don’t even compare.

Here’s the 12-month graph of the Euro vs the USD. The reason this matters is that a diversified global portfolio is likely to include “international” assets. The issue is that they need to be re-translated into USD terms.

So in addition to the domestic-currency result (we use the Euro), the fact that if the EUR is lower, then you have a “double whammy.”

So here is the first layer, in EUR terms. You can see, these are 1-week results. And these are well-known names, mostly. Source: Bloomberg / The Market Ear.

Now add the foreign exchange translation, on top of that (yearly chart, you can see the last week was particularly bad, as expected by the war over Ukraine).