The financial sector simply hasn’t been a strong one this year, and that has led to quite a bit of volatility surrounding stocks like AIG. However, as we near the end of the year 2016, new life is being breathed into the sector, and AIG is benefiting. Today, we’ll talk about the one factor that’s leading to a change in the entire sector, how it’s likely to affect AIG moving forward, and what binary options traders should watch when trading the stock.
Here’s The 1 Factor That’s Changing Opinions Surrounding The Financial Sector
The one factor that’s leading to strong movement in the financial sector is relatively simple to understand. It is a shift in opinion with regard to the United States Federal Reserve and what they plan to do regarding their interest rate.
In December of last year, the Fed finally started to increase its rate from record low levels. Following the rate hike, the Fed said that it planned on two incremental increases throughout the year 2016. Unfortunately however, economic conditions around the world haven’t been all that positive. As a result, the Fed has delayed increasing its rate, leading to big movement in the financial sector (I’ll explain why later).
Nonetheless, opinions with regard to the situation are starting to change. Recent reports show that economic conditions, while they aren’t perfect, are starting to improve in the United States in a big way. On top of that, delays in the rate hike also had to do with the state of the global economy and how global economic risks affected the condition of the US economy. However, it seems as though global economic conditions are starting to improve as well. As a result, many investors have it set in their minds that December will be the month of the next interest rate increase.
What This Has To Do With AIG
AIG is an insurance and finance company. The truth is that if a rate increase does happen, those likely to see the largest positive affect are those who do business in this industry. At the end of the day, low interest rates cause several issues for companies in the finance sector. First and foremost, low rates cause wide market shifts and expectations of a larger appetite for risk among experts. However, that’s not the only way rates influence AIG.
At the end of the day, as an insurance company, AIG makes more money when it can make long-term investments with low risk and a high yield. Unfortunately for the company, under low interest rate conditions, finding any long term investment with minimal risk and a high yield can be more difficult. However, a higher rate would likely balance the market, leading to better profit potential for the company.
What Binary Options Traders Should Be Watching For
When trading AIG, there are a couple of factors that binary options traders should keep a close eye on. First and foremost, any time you’re trading a stock, it’s important to watch fundamental news surrounding the stock. Remember, the news moves the market. However, as the Federal Reserve’s interest rate story continues to unfold, it’s likely to lead to quite a bit of movement as well. So, keep a close eye on what the experts expect to see from the Fed in the coming months.
What Do You Think?
Where do you think AIG is headed and why? Join the discussion in the comments below!
[Image Courtesy of Wikipedia]