A New Start for January
The economic backdrop in January 2015 is markedly different from a year ago. The price of oil, the most widely used global commodity, is down over fifty percent and new deflation scares are emerging in Japan and the Eurozone. Even Tom Brady’s footballs are feeling the deflation contagion. Besides the plunge in oil prices, aggressive new quantitative easing by the ECB is now helping to reinforce an already remarkably low interest rate environment. Lower long-term interest rates and plunging oil may provide a greater stimulus than any central bank could orchestrate on its own.
How will these factors alter U.S. economic trajectory, the timeline for Fed interest rate hikes, and corresponding cash investment strategies? To address these questions it’s helpful to set a framework to understand each event and its implications. First, what are the causes and impacts of falling oil prices? Second, which central banks are in QE mode, and what factors have led them there? If oil prices and monetary stimulus abroad lead to better economic performance than the Fed previously anticipated, the time table for rate hikes could be accelerated; however, weaker growth could extend the Fed’s patience in maintaining the zero percent rate target. This month’s research explores these evolving factors and their impact on investment strategies.
Best Regards,
Ben Campbell
President & CEO
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