This summer was a time of dramatic change…
In politics, geopolitics and – in world’s two largest economies – in economic policy and markets. Recession fears that loomed mid-summer unsettled markets only briefly, as US consumers kept spending and hopes for a soft landing grew. For investors, it seemed that a September shift to monetary easing in the US and an unexpected stimulus promised in China outweighed anxiety about worsening global conflict and political uncertainty.
Looking ahead, RockCreek sees three themes to watch as the year ends:
Rising political tensions in the US and globally. Will conflict – including potentially in the US – spill over to affect the economy and markets?
Inflation subsiding, back to price stability. Interest rates are going down, but will not go back to zero.
Return of global imbalances? Strong US consumption and growth looks set to continue, lifting the global economy. China’s leaders have now recognized the need for stimulus – but can they meet expectations or will continued uncertainty and absence of deep structural shifts mean that consumers continue to save rather than spend? Economic data in coming weeks – for spending, trade and growth – will be telling.