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A long time coming

Published Wednesday, December 16th, 2015

The ECB have had their big day and so have OPEC, now it is the turn of the Federal Reserve. The ECB disappointed delivering less additional stimulus than expected. OPEC met expectations sending oil prices lower. What will the Fed do? The market is confident it will raise interest rates for the first time in a decade.

The market is not however confident of the fallout. US equities have risen for the last two days suggesting that they see the outcome as positive. Junk bond markets on the other hand have had a minor meltdown with several funds in difficulty. Would Janet Yellen be raising the interest rate if she had not painted herself into a corner? Has QE delivered sustainable growth? Will the emerging market dollar debt burden prove to be the time bomb once feared? The US has never exited a zero interest rate environment before. We are all witnesses to an experiment.

We learnt yesterday that despite the refugee crisis German investors are happy with a second consecutive monthly rise in the ZEW economic sentiment index. The same cannot be said for those involved with the dry freight market unless they are buyers. The long followed barometer of global economic health, the Baltic Dry index, fell to its lowest level (484) since 1985. We are also warned by risk consultancy Control Risks that “the security and political risk outlook is worse than at any point in the past decade.”

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Posted by David Hufton