Jan 3, 2016

A Volatile End to the Financial Markets of 2015

Fed Liftoff!  (Source: Getty Image)

December 2015 is one volatile month, capping an end to a eventful 2015. Here is a quick recap of the events of Dec 2015:

EU Central Bank quantitative easing program disappoints
The financial markets expected a hefty package when the ECB announced an expansion of the QE program back in September. However, the package announced at the start of December fell short of what the market expected and the European stock market fell due to the disappointment. In my opinion, the package was probably toned down in order to balance the potential interest rate rise in US so as not to create a huge disruption in the currency and debt market due to a divergence in the monetary policies of the two region. A too rapid fall of EUR against USD over a short period of time will lead to a huge financial strain for corporations and banks in both regions.  

US Federal Reserves raises interest rates for first time in 10 years
Global financial markets rallied strongly on news that the US Federal Reserves pushed the button for an interest rate liftoff. The financial markets also like the fact that the Fed will raise interest rates slowly and gradually so as not to disrupt the slowly recovering US economy.

Oil Price falls to the $30 range causing panic among the stock exchanges
The rally led by the Fed interest rate liftoff was disrupted by the continuing weakness of the oil prices. Emerging markets which have a big portion of their economy devoted to energy and mining were hit badly by this sell-off as fears of more potential bankruptcies for oil and mining companies will lead to a major disruption in these economies

The update for this month will be short as I will be focusing on composing the annual investment report for the year. Most of the stock markets around the world, with the exception of Japan, China and a couple of European nations, ended in the negative zone, with emerging markets being hit the worst. The Singapore stock market retreated 14% for 2015 and I expect the false rally supported by the China government to unravel some time down the road as they gradually release their financial support. The portfolio is down 1.7% for the month as compared to the MSCI All Country index which lost 2.4% during the month. The greatest contribution to the month losses came from the allocation into Europe giving back some of the 13% gains that was made during the 3 months rally.

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