Markets and investors are very unsettled at present and there is a number of unresolved issues which are culminating in heightened volatility. Whether it's about forex movements versus earnings expectations, Japanese and European QE versus US Fed hikes, the net impact of lower oil prices between producers and consumers, temporary or structural deflation, whether to rein in government deficits slowly or quickly and whether the Apple new watch's 18 hour battery life is enough in a 24 hour time system, investor uncertainty is on the rise. At present QE seems to be trumping everything else and driving sharemarket performance, both absolute and relative. Although the FOMC is meeting this week and investors are expecting them to remove the 'patient' tag, I think currency movements are emerging as the key issue for 2015. Central banks in economies with weak output growth are in a race to lower their exchange rate to boost exports and consumer and investment through lower interest rates, whereas the UK and US are looking to tighten rate as their recoveries are sustainable. The key for the US Fed is the timing and whether they fear rising growth sparking inflation or rising rates choking off the recovery. US growth is going to be weak in the December March quarters and this is likely to deter the Fed from doing anything hasty and given that there is no inflation and no wages pressure at all, it is hard to see which one of their economic objectives are being threatened to warrant higher rates. I think they can afford to wait, but I seem to have the minority opinion on that one and if they go early recent currency and sharemarket trends will continue, as sure as night follows day.
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