We would like to start our outlook by reviewing the top economic news events in 2014 which we believe are influencing markets:
- The impending end (and ultimately the reversal) of Quantitative Easing in the US;
- Emerging Market weakness and the Chinese slowdown;
- Japan’s experiment with Abenomics
- The Russian military intervention in the Ukraine and the annexation of Crimea;
- And as last item we mention something which has been conspicuously missing from recent news:
- Discussion on the imminent collapse of the Eurozone.
In the next section we will discuss the news events in light of their effect on markets. Before delving deeper into these specific issues, let us first look at our global expectations.
We expect global growth in 2014 to be substantially higher than in 2013, namely 3.75% versus 3% growth.We expect global growth in 2015 to continue on at the 2014 level of 3.75%.The main impetus for the rise in growth will be coming from the developed world. Three quarters of the growth will however still be coming from developing countries, this is down from four fifths in 2013. In 2014 Eurozone growth should be positive at around 1%, this is substantially up from -0.4% in 2013.The US should also show higher growth at 2.5% but it was already higher at 1.9% in 2013. Japan is the clear dissonant, a slowdown in growth from 1.6% to 0.8% is expected for 2014.
This global backdrop is a positive one that should be conductive to continued European muddling through without big macro economically induced credit events. …
