News this past week
- China’s manufacturing activity contracts
- Chinese equities tumble
- People’s Bank of China reduces currency reference rate
- Tensions rise between Saudi Arabia and Iran
- Brent crude rises after touching 11-year lows
James Klempster, CFA shares his view:
2016 looks set to be a year of challenges and competing concerns for global investors. Towards the end of last year we saw the first US Federal Reserve (Fed) rate hike since 2006 and this paves the way for a genuinely divergent interest rate policy between major global central banks for the first time since the global financial crisis. We have noted before that we expect the Fed to be circumspect in its policy tightening and there is no new news that suggests the need to move away from this cautious approach. As a result we do not think that the policy differences between the US, Europe and Japan will be a key cause of risk in 2016 because the policy differentials will not be extreme. The good news underlying the Fed’s policy is that the US consumer feels good about life and is starting to see real wage growth which should feed activity further.