- Although we remain positive on world economic growth, 2015 has seen a slowdown from around 3.4% to 3% caused by a falloff in emerging markets and a weaker than forecast recovery in the developed world. The outlook for 2016 looks slightly better with growth forecast to rise to 3.25%. However, in the past we have seen that when only a marginal increase is forecast this can easily cross over to a marginal decline. That said, we believe 3% growth is not that bad, perhaps if only because some of the negative extremes are moderating.
- World market sentiment is most strongly linked to the US where Fed watchers are trying to gauge the state of the economy on the back of the Fed’s interest rate decisions. Consensus seems to be that US rates will be going up somewhat. In Europe and Japan, stimulus is still the order of the day. This outlook of higher US rates has pushed the dollar up versus the Euro to a more than 5-year high.
- The main news centers around developments in the Syrian crisis; with refugee flows overloading Europe’s will to deal with it and IS terrorism being brought to Europe as we have seen in the Paris massacre. Europe is trying to formulate a reaction to the problems but cannot seem to find a common position. A possible deal with the Turks is to keep the refugees in the area for which Turkey will get money and renewed negotiations on Turkish entry into to the EU. However, we do not believe this will be the end of it, as Europe still has no policy for dealing with the root cause of the problem in Syria. The bombings were supposed to buy time in order to allow for the training (arming) of local forces to provide order and security. This has not been very successful in Afghanistan or Iraq, so perhaps another approach is necessary.
- On the economic front low commodity prices, the strong USD (stimulating exports), low interest rates and improving government finances have led to more economic activity and a gradual decrease in unemployment across the board.
The UN climate summit is also being held in Paris. The US has indicated that the result of the summit will not include a treaty, legally requiring countries to reduce emissions. The Paris organisers and sponsors are however hoping that far-reaching agreements can be made…
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