Investors are gorging on American assets

Investors are gorging on American assets

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ECONOMISTS think prices, like spilt ketchup, are sticky. They move only slowly as firms digest economic conditions. Financial markets are an exception. Computerised trading by thousands of participants means prices, especially of currencies, can move in a McFlurry.

Since The Economist last updated the Big Mac index (BMI), our lighthearted guide to currency valuation, burger prices have remained constant in 19 of 44 countries. But every currency has shifted in value (see chart 1). Our index uses a nugget of economic wisdom called purchasing-power parity: currencies should adjust until goods cost the same everywhere. If, once converted into dollars, Big Mac prices vary, one or other currency looks dear. Big movements in exchange rates, without similarly supersized shifts in burger prices, can send a currency up or down the index.

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div class=”ec-content-image ec-thumbnail content-image-full”><a href="https://www.economist.com/sites/default/files/images/2018/07/articles/main/20180714_fnc125_0.png"…Continue reading

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