Predictions for 2016 – Emerging Markets, Assets, Income and Interest Rates
The financial outlook for 2016 is likely another year of challenges and volatility in terms of the world market. For the US, the election is certainly headlining the news, however, voters in other countries are also focusing on the polls. In Europe, there’s a potential EU mandate in the UK. With the increase of extremist parties, their vote could have serious ramifications for the economy.
The strength of the dollar will be an important factor in the US. The question is will the US be able to separate from outside dealings, whether consumer spending will increase significantly and will it be enough to raise interest rates. Europe’s Central Bank’s policy intent remains the centre of attention, while a look at the continued slump in China’s shows that emerging markets could affect the world’s resource-based economies. At the same time, select economies in Latin America are noticing signs of normalisation, even as prices linger at an exceedingly high rate.
Commodities are expected to remain a pivotal component, governing global growth in 2016 with supply and demand as its bedrock for intrinsic goods, equity and fixed income markets. Will manufacturers continue to lower prices as it is a major reason for their survival? Because of the inclinations, will consumers or countries find confidence in the future?
Over the next 12 months, investors will face possible changes in borrowing costs, which are at an all time high. Leading banks may simplify policies, while attempting to estimate the degree of China’s poky growth margin. What are the best ways for capitalist to find income and fund investments? Exactly, what are the predictions for interest rates and emerging markets for 2016 as they are the most popular subjects for investors? Stephen Jones, Kames Capital’s Chief Investment Officer, offered his opinion on the future and on past events.
Will Interest Rates Rise in the UK?
Inflation and economic status determine whether or not the Feds will hike up interest rates. Economic conditions must be taking a turn for the better if they were to do so. The US recently experienced a rise, targeting between 2.25 and 0.5 percent. The raise, which has been long anticipated, is the first in a decade, however, the question is; how does it impact other countries?
Jones reveals that in spite of the improvements in the UK’s economy and the movement of others to follow America’s lead, he is in favor of the “lower for longer camp.” Rate increases do not live up to expectations when it comes to damaging the stock market… they provide direct assistance to some industries.
Jones believes that the UK will receive a rate increase, however, it will be one that is in small stages. He evaluates the policy makers as being sluggish and careful not to upset the balance of things. In either case, rising rates can only be good as they represent a growing economy. Rising rates can render tremendous success to banks, insurance companies and to brokerages. This is primarily due to those companies paying out claims and having a large cash reserve.
Did Economic Value Revert Back Into Emerging Markets?
Emerging markets faced twin heads last year and provided much disappointment as commodity prices weakened. However, the current situation is that emerging market currencies have shifted distinctly, which increased the cost of servicing extrinsic indebtedness.
Public investors have not seen the rise in growth they way they had hoped, which gives way to a broadening fiscal deficit. As a consequence, they lost money last year and the economic value of their investments dropped. Some would argue that the lost was already accounted for. Stephen Jones claims that there is potential in bonds as opposed to equities, however, each opportunity should be watched as the value reverts back into the emerging markets.
Where is the Income that Investors are Seeking?
Jones foresees a market increase in some areas as property investors could benefit from rents, which also feeds the companies who return cash to shareholders. Nonetheless, there is still some concern about where investors can find income. When it comes to the high end of the credit spectrum, Jones also thinks there is a potentiality for a healthy yield in quality fixed income.
When Howard Marks was asked about emerging markets, income and interest rates, he said this:
“The most important thing to do is to assess not the future, but the present. Awareness and understanding of cycles are essential tools for investment survival. That’s why I always say: “We may never know where we’re going, but we’d better have a good idea of where we are.””
The the year 2016 takes off, there seems to be evidence of debt in the “first white-capped waves.” Some of the largest risks are in the emerging economies as the divergence between the US and the world’s economy unfolds. For some, the primary issue is that the problem stems from internal debt. The UK’s situation is touch-and-go, though it has some interesting forces driving its markets.