Uncertainty Drives Volatility, Caution: Inflation patterns are a major uncertainty. Expectations are that the year-over-year inflation measures will rise. But at what pace? Moreover, what does that tell us about the outlook for 2017?
Fed Actions and the Yield Curve: While comments by Federal Reserve officials U.S. inflation patterns are a major uncertainty.— ,suggest a path of federal funds increases that outperform market expectations, we anticipate three increases in the funds rate—one increase below the pace indicated by the Fed’s dot plot—given our expectations for growth and inflation.
The Dollar: Given the rise in the funds rate and continued uncertainty over global growth, we anticipate the dollar’s value will continue to rise in the year ahead, although the extent of the gain will be more modest than in 2015.
Global Economy-All in Perspective: things are not as bad as some pundits tend to suggest just by watching the ups and downs of some of the largest stock market indices.
Perhaps the most concerning issue for the global economy going forward is the, current low inflation environment, which not only underscores the weak pace of economic growth but also very little leverage that monetary policy is having upon economic variables.
Today the pull from developed economies remains very limited, and without the possibility of a strong fiscal response, the expectation is for the current weak economy environment to persist.
Read the complete outlook here: monthly-20160113