With a bit of luck, the coming year for markets will not be very different from 2014 for investors in developed country equities. But bond markets could face a bumpier ride, and investors should look out for turbulence related to political worries in Europe and the strength of the dollar, says Stephanie Flanders, Chief Market Strategist, UK and Europe, JP Morgan Asset Management.
The strength of the dollar is a side effect of the increasing divergence in economic performance and policy between the Anglo-Saxon countries and most of the rest of the world.
“Like the fall in the oil price, an orderly rise in the greenback should be positive for markets and the global economy, helping to keep US monetary policy looser for longer while supporting a recovery in Japan and Europe. But a more dramatic shift in the dollar’s value would pose graver risks for emerging markets and could threaten global financial stability if the US becomes the only game in town,” says Flanders.