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What is market interdependence?

Updated: 9/13/2023
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11y ago

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Market interdependence is when the movement of one market is affected by the movement of another market. For example,

- a drop in the value of the dollar vs other currencies can cause a rise in the price of oil in dollars since oil is a dollar denominated asset. In this example, the oil market is dependent on the foreign exchange market

- a rally in the bond market (which results in lower bond yields) can result in a rally in the stock market. The lower rates decrease the borrowing costs for corporations (lifting profits) and the lower returns in the bond market cause investors to shift money to the Stock Market for higher returns.

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