Liberal Media Exposed

Saturday, January 18, 2020

2014 In Review – Financial Updates

As 2014 comes to an end it’s time to have a last look back at the financial events of the year. It’s been a complex, and at times confusing, picture set against the background of a continuing global recovery from the financial crisis. Growth has been uncertain at times, alarming the stock markets. Conflict and crisis have played a part in destabilizing commodity prices and investor confidence, the shadow of debt still troubles large parts of the world economy and currency fluctuations offer both opportunities and dangers. Let’s have a look at each of these in a bit more detail.
Firstly, the equities markets. In general share prices have had a positive year. Most economies have been growing steadily as the global economy climbs away from the wreckage of 2008, and that’s pushed share prices up. However many analysts are concerned that the markets may be overheating, with prices rising faster than economic performance seems to justify. The Eurozone has registered the highest rises through the year, with prices already up 28 percent by June, with the USA close behind. On the other hand the UK, which has the highest actual growth figures in the EU and compares well with the US economy, saw much more modest and realistic growth in the 13 percent bracket. Short term these buoyant prices are good news for investors, but an unsupported bubble could collapse painfully at any time.
Commodity prices have been highly volatile, especially in the second half of the year. The precious metal market traditionally suffers as share prices rise and that’s been reflected in spot prices that have struggled to get away from prices that often aren’t far off their five-year lows. The real story has been oil, though. Western governments originally engineered a downward trend to punish Russia’s petro-based economy for the February invasion of Ukraine, using increased US domestic production to deflate the market. It seems to have taken on a life of its own however, with OPEC refusing to lower quotas and the price of Brent crude now below $60 a barrel. It looks likely the Middle Eastern producers are trying to drive US shale oil out of the market, before raising prices again.
Meanwhile in the Eurozone there are rumblings of further debt problems. Germany is weary of bailing out less efficient countries that then try to break away from the agreements they signed, with Greece being the most frequent offender – a leftist party that’s riding high in the polls has pledged to raise public spending again despite Greece being dependent on berlin for funds. Worst case is that the Euro begins to fragment, with Club Med countries breaking away to leave a smaller but much more efficient German-based core. That would lead to a much stronger Euro and reduced German exports, but it could also harm the dollar’s status as reserve currency of choice.
The Federal Reserve probably wouldn’t mind a weaker dollar, because right now it’s dominating the currency markets but putting a break on US exports and probably handicapping growth. Meanwhile US inflation is still well below the Fed’s 2 percent target, leading to caution and repeated delays of long-awaited interest rate rises.
Overall the economy seems to be continuing its recovery, but there are reasons for caution as well. Be prepared to invest in safe havens at short notice – gold maintained its value year to year, with its final price being within a few dollars of the same time last year. Now it’s time to see what 2015 will bring. Happy New Year!