With the end of 2014 fast approaching, investors have a new front of uncertainty – the weakening of oil prices, says Guy Monson, CIO and Managing Partner of Sarasin & Partners…
Financial markets will be dominated over the next six months by the ramifications of a near fifty dollar drop in oil prices. Energy consuming economies in Asia will boom, but outright deflation risks in Europe and Japan will rise” he adds. He also anticipates more generous liquidity from Central banks and a continuing hunt for yield by investors and ultimately a rebound in global growth.
Deflationary risks for highly indebted countries are notoriously dangerous and I have adopted a cautious and selective stance when it comes to sovereign issuers with the actual risk of deflation engulfing much of Europe. Ultimately, financial markets should again still be the winners if central bankers are as good as their word. In particular, potential winners are higher yielding global equities, REITs, selected infrastructure and, for a while longer the US Dollar.
It is just possible that European growth might finally catch hold in H2 of next year and that the world could see synchronised global growth in 2015.
