FED (America) Raises Interest Rates what Next??
We view the Fed rate rise as a positive for the markets as it removes some of the uncertainty that has been dogging the markets of late.
The concerns over the slowdown in the Chinese economy and implications of the falling oil price remain, but at least the uncertainty as to will they or won’t they increase rates and the impact it will have on the emerging markets has now been clarified. The initial reaction to the hike has been positive in both developed and developing markets. This will most likely prove short lived as the market will then refocus on China and the oil price. We do not expect the Chinese economy to grind to a halt and we would not be surprised if the news from China starts to be less negative (rather than good), but even this would be a positive in the eyes of most investors.
I feel that the fed will continue to slowly increase rates giving further evidence that the American recovery is robust.
The UK does not look like raising interest rates early in 2016 however I believe that we will see an increase and typically the UK lag the FED by around 6 months so don’t be surprised to see Mr Carney making an increase around June/July.
The markets have suffered over the last 5 months with the FTSE 100 falling as much as 17% from its 2015 peak however our portfolios have withstood this large level of volatility.
This shows how actively managed funds and pro-active investment management can begin to prove true value when markets do indeed begin to become very volatile.
My view is that markets will continue remain volatile but we are quietly bullish that 2016 will become a better investment year than 2015 with Europe and Japan leading the way.
Chief Investment Officer