The dollar, dividends and debt are the three themes that look set to dominate the global financial markets in 2015, according to investment platform provider AJ Bell.
“The US dollar is the world’s haven currency and its strength points to America’s economic outperformance of its Western peers, the prospect of global central banks running a wider range of policies next year and investors’ nagging doubts about the durability of the long-running stock and bond bull runs,” says Russ Mould, AJ Bell Investment Director. “The reach for yield and a sustainable source of income from dividends and coupons will also dominate portfolio-builders’ attentions, especially as governments’ huge debt piles mean they cannot afford rapid interest rate increases and returns on cash are likely to remain subdued as a result.”
Notes for Editors
- Since America’s withdrawal from Bretton Woods in 1971, the US dollar enjoyed two multi-year upswings and two prolonged declines. Both increases, one in the early 1980s and one in the 1990s, coincided with and possibly even caused great upheaval in emerging markets, as nations and companies found themselves struggling to repay their dollar-priced debts.
- The bond markets are pricing in the first US interest rate increase for the second quarter of 2015, following the final US Federal Reserve meeting of this year (17 December) whereas the first hike in borrowing costs in the UK is expected next autumn. By contrast, Japan and the Eurozone may continue to loosen, rather than tighten, monetary policy.
- According to the sixteenth Geneva Report on the World Economy the global debt-to-GDP ratio has increased since the 2007 crisis from 176% to 214%, excluding financial companies.