• Home
  • News
    • People moves
    • Africa
    • Asia
    • Australia
    • Canada
    • Caribbean
    • Domicile
    • Europe
    • Latin America
    • North America
    • Middle East
    • US
    • US
    • UK
  • Products
    • Funds
    • Pensions
    • Platforms
    • Insurance
    • Investments
    • Private Banking
    • Citizenship
    • Taxation
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Directory
  • Video
  • Advertise with us
  • Directory
  • Events
  • European Fund Selector
  • Newsletters
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
  • Advertise with us
  • Directory
  • Events
    • Upcoming events
      event logo
      Sustainable Investment Festival 2021

      The Sustainable Investment Festival will run online from 22-25 June and will include thought-provoking presentations from renowned keynote speakers, innovative breakout events and sessions specifically tailored to meet the information needs of fund selectors, financial advisers, pension consultants, trustees and scheme managers.

      • Date: 22 Jun 2021
      • Online, Online
      event logo
      International Investment Awards 2021

      The 22nd International Investment Awards will take place on 7th October 2021. The II Awards are the longest-running event of their kind and last year saw a record number of categories and entries.

      • Date: 07 Oct 2021
      • Online, Online
      View all events
  • European Fund Selector
International Investment
International Investment

Sponsored by

Sharing Alpha
  • Home
  • News
  • Products
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Video

Challenges and opportunities of 2016

  • Viola Caon
  • 18 December 2015
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  

By WisdomTree Europe

Amid the recent turmoil in global markets and the downward trend for commodities, a dramatic shift in monetary policy in the US is poised to create new challenges (and opportunities) for investors in 2016.

Related articles

  • Mixed directions for global asset allocators
  • Return of the Bund Bears
  • Potential QE from ECB points to a steeper future
  • Market dangerously complacent, warns Rothschild Wealth Management

WisdomTree Europe’s director of research, Viktor Nossek, believes there are a number of key themes which may emerge next year as central bank policy finally starts to diverge.

Below, Nossek identifies several potential outcomes which could come to the fore, including gains for European equities as QE continues, ongoing pressure on commodities, and why junk bonds will look even more vulnerable as credit spreads widen.

Europe’s Rebalancing Act
Domestic demand-led economic activity, underpinned by a more competitive labour market and a late arrival of easing credit conditions to small businesses, is solidifying Europe’s recovery.

This revival in consumer spending should trigger a virtuous cycle of higher tax revenues and prompt companies to invest more, broadening out Europe’s structurally-led recovery in the process.

Set against a tightening Fed and a weak commodities backdrop, the ongoing uncertainty surrounding exports in Europe is countered by the rebalancing act towards consumer spending, although we are still at an early stage as we head into 2016.

Weak euro, Strong dollar
The ECB is expected to use dovish rhetoric, rather than further policy easing, in its efforts to continue to suppress the euro. Given the upbeat economic outlook for the eurozone, weak inflation will be a secondary concern behind keeping a lid on the single currency.

Any further weakness in the euro will help to boost exports and buy time for domestic demand-led growth to sustain itself.

Persisting expectations of rising US rates and a robust US economy should also help to keep the euro fundamentally weak and the dollar strong, and reduce the pressure on the ECB to provide further stimulus.

While the Fed has finally pulled the trigger moderate US wage growth pressures, coupled with tightening conditions in credit markets, should allow it to postpone further rate hikes into the summer of 2016.

Rhetoric (as opposed to actual policy action) by the Fed will be used to strengthen or diminish the divergence of monetary policy expectations with the ECB, and we therefore expect the euro-dollar trade to remain volatile.

Corporate credit to decouple from sovereigns
The widening of credit yield spreads since H2 2015 is expected to continue in 2016, on the back of concerns over growing levels of indebtedness as US rates rise.

12
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  
  • Topics
  • Asia
  • Currency
  • Europe
  • monetary policy
  • Quantitative Easing (QE)
  • United States of America
  • WisdomTree
Back to Top

Most read

Pension lifetime allowance warning for clients with £500k already invested
Pension lifetime allowance warning for clients with £500k already invested
Dogecoin warning as Bank of England sets up digital currency taskforce
Dogecoin warning as Bank of England sets up digital currency taskforce
UK regulator bans financial adviser for dishonesty
UK regulator bans financial adviser for dishonesty
UK's HMRC extends deadline for 'one of the biggest tasks facing advisers'
UK's HMRC extends deadline for 'one of the biggest tasks facing advisers'
Singapore businessman Ng Yu Zhi faces more charges over alleged $740bn fraud
Singapore businessman Ng Yu Zhi faces more charges over alleged $740bn fraud
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017
Loading