What to watch out for in 2015
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2015 is shaping up as a turbulent year in investment markets mostly because the global economic outlook is subject to a greater than usual set of uncertainties and risks. We see the year starting on a weak, volatile note for risk assets. The best of economic growth among developed economies is still likely to reside with the United States but headwinds are showing signs of developing that may cap US economic growth in 2015. The Federal Reserve will almost certainly start to lift its funds rate (currently close to zero) either in Q1 or Q2 2015. The US dollar also looks set to strengthen further, especially if as seems likely, the European Central Bank and the Bank of Japan expand their balance sheets (adopt or extend QE) as seems likely. Also, sharply falling oil prices present a two-edged sword for US growth prospects, cutting investment and jobs in the previously booming US shale oil industry, but also providing the equivalent of a hefty tax cut to US consumers and some businesses. All told, the US economy still looks set to perform well in 2015, but not as well as in the nine months extending from the end of Q1 2014 through to the end of 2014.
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