2023-01-27 Markets

Equities had another good week while interest rates were all marginally up. There was not much to report in terms of news or other market related issues.

Most of you know The Economist publishes periodic updates of its Big Mac Index, a way to track how much currencies are over- or under-valued by comparing the price of similar locally produced goods – in this case the price of a Big Mac, a much loved if not culinarily acclaimed hamburger at McDonald’s. Often this or similar statistics are used to determine whether one should buy or sell a certain currency – the idea being an overvalued currency will go down whereas a cheap one will move up in price. Does it work? Not really, at least not often.

The Swiss Franc  is currently overvalued (first graph) and it has been that way for over a decade (and possibly more; second graph). Despite this from the end of 2010 to today the Franc has appreciated over 23%, according to the trade weighted index calculated by Deutsche Bank. Currency traders beware.

[Graphs: The Economist]