Fundamentals
in sentence
405 examples of Fundamentals in a sentence
In such circumstances, prices may well move far from the
fundamentals
as assessed by a hypothetical collective wisdom that would pool all information in the market.
Eventually, stock prices do reflect the
fundamentals
of the economy.
Prices are not determined solely by the flow of current supply and demand and their current economic
fundamentals
(such as disruptions from weather or politics).
They are increasingly determined also by calculations regarding expected future
fundamentals
(such as economic growth in Asia) and alternative returns (such as interest rates) – in other words, by speculators.
But speculators more often act as detectors of changes in economic fundamentals, or provide the signals that smooth transitory fluctuations.
The post-crisis scenario finds the region with much better macroeconomic
fundamentals
than the industrial world.
As the late Rudi Dornbusch (who preceded me as the author of this series of commentaries) used to say, unsustainable capital inflows always last much longer than economists, who tend to focus firmly on the fundamentals, believe possible.
Investors funding the capital inflow and the country receiving the money always think up reasons why this time the inflow is sustainable, because it reflects some supposed permanent transformation of
fundamentals.
If the renminbi were to depreciate by, say, 2% every day, it would take very little time for the currency to lose 20% of its value – enough to cause a panic and, regardless of the country’s economic fundamentals, send the exchange rate into a tailspin.
As long as the marginal piece of German debt is used as collateral for a short-term loan or as the centerpiece of a repurchase agreement to gain liquidity, its value is much more likely to be determined by the terms on which the ECB accepts it as collateral than by its
fundamentals.
Some, including new US Federal Reserve Board chairman Jerome Powell, believe that economic
fundamentals
are strong, and that what stock markets experienced in early February was only a temporary hiccup.
Then there are those who believe that
fundamentals
are in fact weak, that the current upswing will prove unsustainable, and that investors should regard stock-market gyrations as a necessary wakeup call.
Both schools of thought share a focus on fundamentals, unlike a third – and, in my opinion, highly plausible – view: that the asset-price volatility we have been seeing has little or nothing to do with changes in
fundamentals.
We tend to be uncomfortable with the notion that an economy’s
fundamentals
do not determine its asset prices, so we look for causal links between the two.
The idea that asset-price movements can be unrelated to
fundamentals
is not strange to students of economic theory.
Price movements (the expected capital gain) can drive buying and selling decisions even in the absence of changes to expected dividends (the fundamentals).
It is not just nerdy professors who are skeptical on the importance of
fundamentals.
So if the price of a financial asset is not guided – at least for some periods – by fundamentals, where does that leave central banks?
A final disclaimer: believing that
fundamentals
do not always pin down asset prices is not the same as believing they are irrelevant, much less that current US
fundamentals
are in good shape.
So it is possible that conservative American business executives will invest more not because the tax cut will improve the
fundamentals
of the US economy and increase demand for their products, but just because they believe it will.
Instead, they were being forced to judge the sustainability of financial asset prices that, boosted by liquidity, had notably decoupled from underlying economic
fundamentals.
Yet the fundamental longer-term challenge of allowing markets to re-price assets to
fundamentals
in a relatively orderly fashion – and, critically, without causing economic damage that would then blow back into even more unsettled finance – remains.
Perhaps the reason was ideology: we were too wedded to the idea that markets are efficient, market participants are rational, and high prices are justified by economic
fundamentals.
Critics argue that the
fundamentals
were deteriorating in plain sight, and that the market (and economists) ignored it.
The populist nationalists, because they reject these fundamentals, are the unremitting political antagonists of all liberals.
If the relationship between average incomes and house prices is stable, then economic
fundamentals
clearly have the potential to explain prices.
Moreover, there was no agreement among buyers about the causes of recent price movements and no cogent analysis of
fundamentals.
Maybe this allows him to focus more on long-term
fundamentals
– and thus to make investments that may not perform well in the short run.
So-called price-keeping operations by China’s monetary authorities (an approach tried in Japan in the early 1990s) are presumably the reason why the domestic stock market rose sharply over the last year, far beyond the levels warranted by the country’s economic
fundamentals.
But even if government intervention can affect exchange rates in the short run, in the longer run, it is market
fundamentals
that matter.
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