Q4 2014 Economic Commentary

Morningstar Investment Management recently published its quarterly commentary for the fourth quarter of 2014, exploring the future of global monetary policy, the effect of oil prices, and fear of deflation, among other topics.

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Key takeaways of the commentary include:

  • Monetary policy in the United States and the Eurozone/Japan will diverge in 2015—and probably in 2016. But the Federal Reserve may start raising rates later than the consensus expects. Tightening may also be smaller in 2015 than the market thinks.
  • Despite the sharp appreciation of the U.S. dollar, further rises are probable.
  • Cheaper oil has lowered the market’s projections of inflation in the short term. Growth expectations, on the other hand, have risen for most mature economies. A rebound in the price of oil is likely in 2015, but new supply from unconventional oil sources has depressed the long-term baseline price.
  • Headline inflation will shortly turn negative in many advanced economies, prompting some economists to worry about a deflationary spiral. The latter, however, is unlikely in economies with fiat money and excess bank reserves.
  • Grexit—Greece’s exit from the Euro—is more likely than ever, as markets appear too complacent.

 

 

The report also includes region- and country-specific commentary for the United States, Eurozone, United Kingdom, Japan, China, and India.

You can click here to read the complete Q4 2014 Economic Commentary.

 

The information, data, analyses, and opinions presented herein do not constitute investment advice; are provided as of the date written, solely for informational purposes; and subject to change at any time without notice. This content is not an offer to buy or sell any particular security and is not warranted to be correct, complete or accurate. The indexes shown are unmanaged and not available for direct investment. Past performance is not a guarantee of future results. Morningstar Investment Management Asia Limited is regulated by the Hong Kong Securities and Futures Commission and is a wholly owned subsidiary of Morningstar, Inc

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About Author

Francisco Torralba, Ph.D., CFA  Francisco Torralba, Ph.D., CFA, is an economist with Ibbotson Associates.

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