At first I thought it was because I needed a holiday, but even after a two week break at the beginning of November the feeling remains: haven’t we already written about dollar strength and when it might end, the amazing disappearance of productivity, and whether or not the Fed will actually raise rates?
Indeed, looking back over the past few weeks with fresh eyes, there is a distinct sense that leading into December, many of the economic drivers and consensus trades that were on managers’ tongues were very similar to those that were being spoken of in December 2014 – the impact of a Fed hike on emerging markets, oil prices, central bank policy divergence, and the possibility that bond yields could push even lower from here.
The primary reason for this is that, while much has happened in 2015, a number of key things have not, key among them a US rate hike – a hike that was first mooted in 2013. And, like the imaginary monsters under a child’s bed, the spectre of what will happen when rates do eventually go up has continued to grow the longer investors have been kept in the dark.
The difference perhaps between global financial markets and the child protected only by his or her blankets from the gnashing teeth and sucking tentacles, is that the unprecedented nature of the monetary easing that has led markets to their current point has left investors not only in the dark but in an entirely new house, and thus without the implicit guarantee that the monsters under the bed are, indeed, imaginary.
And, as a result, markets have been driven by little more than sentiment a frustrating state of affairs for asset allocators, many of whom find themselves bereft of strong convictions. As one manager told me today: “It is an incredibly frustrating time, you don’t really get the feeling that anyone is paying attention to fundamentals at the moment.”