Practical analysis for investment professionals
10 November 2014

Turning Points: Shifting Central Banks, Fading Growth, and Falling Oil Prices

Posted In: Weekend Reads

Just as the US Federal Reserve stopped printing US dollars, the Bank of Japan (BOJ) announced that it would amplify its previous money printing, now taking it to a full 15% of GDP. In addition, the European Central Bank (ECB) has adopted a significantly more aggressive position and suggested that it will step up efforts to monetize Eurozone bonds.

All this is happening at a time when global growth appears to be slowing, so it is not at all clear that lower currencies in Japan and the European Union will lead to greater exports.

In addition, oil prices have fallen sharply in the past two months — from the low $100s per barrel to the low $80s. Even the Saudis have announced that they are comfortable with lower prices. Against the backdrop of spiking US oil production, it seems that the status quo has changed. In fact, the central message encoded in last month’s news is that the status quo has changed. We are shifting from the post-crisis recovery to late cycle growth. Only now there is greater concern about large pockets of low-quality debt (high-yield bonds, sub-prime auto loans, etc.) and the decreased ability of central banks to deal with these problems.

Here’s a wrap-up of key issues affecting global markets for fundamental investors.

Currencies

Commodities

China’s Direction

Credit Markets

Derivatives

Energy

Euro Crisis

Hedge Fund Money

Interest Rates and Central Banks

Japanese Debt and Inflation

Stock Market

Follow the Bubble

Time Capsule

During World War I, the Fed Reserve worked behind the scenes to finance France and Great Britain. In effect, the United States paid for their war munitions via an inflation of the currency paid by US citizens. This article is a quick but fascinating read on monetary history during World War I.


All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Photo credit: ©iStockPhoto/P_Wei

About the Author(s)
Ron Rimkus, CFA

Ron Rimkus, CFA, was Director of Economics & Alternative Assets at CFA Institute, where he wrote about economics, monetary policy, currencies, global macro, behavioral finance, fixed income and alternative investments, such as gold and bitcoin (among other things). Previously, he served as SVP and Director of Large-cap Equity Products for BB&T Asset Management, where he led a team of research analysts, 300 regional portfolio managers, client service specialists, and marketing staff. He also served as a Senior Vice President and Lead Portfolio Manager of large-cap equity products at Mesirow Financial. Rimkus earned a BA degree in economics from Brown University and his MBA from the Anderson School of Management at UCLA. Topical Expertise: Alternative Investments · Economics

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