Outlook for the Year of the Monkey

A mix of weak Chinese economic data, further Chinese currency devaluation, new stress in the Middle East, softening commodity prices, North Korea's nuclear blast and broader concerns about global growth have contributed to in an increase in investor fear, as shown in Figure 1. below.

There is a lack of consensus on the outlook for global economic growth which waxes and wanes.

On the one hand, economic growth may remain moderate and inflation may remain low in the short term. This backdrop will provide limited evidence for the US Fed to aggressively increase rates, or for other central banks to tighten.