Quarterly Outlook – Q4 2015 – What Happens When U.S. Interest Rates Rise?
What Happens When U.S. Interest Rates Rise?
• Our first key theme for our Q4 update is monetary policy divergence, with the Federal Reserve’s forthcoming rate “normalisation” front and centre for investors, even as other central banks, notably the Bank of Japan and the European Central Bank, continue to ease. Our expectation is for a December Fed “lift-off”, but the risks of a later hike are significant.
• Our second theme is Europe’s internal and external challenges, with the refugee crisis, the rumbling Greece calamity, the possibility of “Brexit” and elections in Spain (just one manifestation of the Eurozone’s toxic politics) dovetailing to create huge uncertainty around the European project.
• Third, is the question of whether emerging markets are victims of their own success, with a long period of robust performance failing to spark the necessary adjustments and reforms to allow that to continue.
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