Financial Year 2014 Global Roundup

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2014, this year was indeed full of surprises, both economically and non-economically. Some countries worried over their economies and some still have their head buried in hope that theirs will soon come out of this infernal cycle of booms and deflations. Many investors are asking themselves the same question during this festive season and this question is “What’s Next for 2015?” Well, before considering next year’s economic situation, let us just turn back around and look what just passed us by since the beginning of Q1.

The International Monetary Fund (IMF)

 

At the beginning of every year, the IMF organizes a huge press conference and a worldwide meeting in order to announce the possible forecast of the upcoming year, revealing the World Economic Outlook (WEO) based on global surveys. Last year’s researches and surveyed made that the IMF forecasted a boost in the global economy, whereby emerging countries would be highly gaining from the international markets and that superpowers such as the US, China, Japan and Eurozone would be the maestros of this global economic boom. Well, this did not happen quite as Mrs. Lagarde forecasted for this financial year 2014.

Japan

 

Abenomics Chapter I

The land of the rising sun did feel the first rays of the sun, but not the adequate money inflow in the economy in order to boost its status of world’s third best economy. To begin with, the country had a rough start with a tough economic trade balance to deal due to the Yen’s high valuation on the international market. This is where Shinzo Abe came in front line, armed with a secret weapon whose name still leaves investors in a bearish state of mind; the “ABENOMICS”. The Abenomics was a series of stimulus meant to lift up Japanese cash flow up, while devaluating the Yen in order to increase exports level. This did not go as predicted by Mr. Abe, as his first attempt was to increase consumption tax on Japanese consumer products. This measure did not have the desired effect over Japanese mindset and the latter decided to promptly slash their consumption level to new substitutes.

Abenomics Chapter II

The second round of Abenomics was to devaluate the yen to the point that export prices would be much affordable to the global market and which will therefore lift the country’s productivity as the exports level rose. On paper, this idea seemed to be the best option available to any country. However, after the devaluation of the Yen, producers found themselves with much demand but way too less revenue in terms of value in order to keep the Japanese economic machine running as it should be. Even with this, the Abenomics kept some hidden measures such as lifting up tax rate by 2% in the next financial year and also to probably keep on devaluating its currency.

JPY

On a more financial note, the USDJPY which was lingering at the 103 levels at the beginning of the year, rapidly inched to the 110 levels and again, rocketed to the 120 line. How? Simply because the world’s economic giant drove its economy to new highs. But this is not the issue and investors are wondering if Abenomics measures will harm the economy? Will it boost it? The key holder to this secret is 2015 and investors would be highly advised to follow fundamentals before heading to this currency on markets.

Eurozone

 

Euro Bloc overview

This particular economy has been swimming in deep deflationary waters since the beginning of this year and to be realistic, next year isn’t going to be easy for the home of 18 economies of the European area. Since interest rates ticked down 0.20%, the economy started to crumble internally with countries such as France and Italy finding themselves with negative fundamentals such as GDP and employment figures.

Europe’s debt crisis was initially triggered by events in the American banking sector. When a slowdown in the US economy caused over-extended American homeowners to default on their mortgages, banks all over the world with investments linked to those mortgages started losing money. America’s fourth largest investment bank, Lehman brothers, collapsed under the weight of its bad investments, scaring other banks and investors with which it did business. Banks stopped lending to each other, pushing those reliant on such loans close to the edge.

Fault from the USA

European banks that had invested heavily in the American mortgage market were hit hard. In an attempt to stop some banks from failing, governments came to the rescue in many EU countries like Germany, France, the UK, Ireland, Denmark, the Netherlands and Belgium. But the cost of bailing out the banks proved very high. In Ireland, it almost bankrupted the government until fellow EU countries stepped in with financial assistance.

Possible buoy to be thrown

Perhaps the most popular solution proposed has been the so-called Eurobond, which would be jointly underwritten by all Eurozone member states. These bonds would presumably trade with a low yield and enable countries to more efficiency finance their way out of trouble and eliminate the need for additional expensive bailouts.

The issue with this proposed solution is mostly that of complacency. Some experts believe that access to low interest debt financing will eliminate the need for countries to undergo austerity and only push back an inevitable day of reckoning. Meanwhile, countries like Germany could face the brunt of the financial burden in the event of any Eurobond defaults or problems.

USA

 

The economic superpower

What else to say about this economy, than it is the most powerful one, and proved it this year with this phenomenal come back in the world’s financial playground. It can be seen that in the wake of abating in the final quarter of this current year, financial development will lift again in 2015. The final quarter stopped with development slipping to just around a 2% annualized pace, in the wake of averaging about twice that rate in the second and third quarters is no foundation for concern. It is not unprecedented for a few solid quarters to be trailed by a weaker one, with development then ricocheting once again as the economy regains some composures.

Picking up toward the end of this current year to a mixture of variables particular to the final quarter; they are not a sign of what's to come in 2015. Case in point, engine vehicle creation, which developed by twofold digit rates in Q2 and Q3, isn't liable to rehash that execution for a third continuous quarter. However it is still on an upward pattern and will help strong development one year from now. Also the level used on barrier that is likely to move in Q4 and is a greater amount of the common pendulum swing after an astounding 16% pickup in the second from last quarter.

Greener greenback for 2015?

Looking ahead, there are a lot of positives coming soon: Procuring is on the ascent, employment opportunities are at a close record level, and cutbacks are rare (demonstrated by a low rate of introductory unemployment claims since May). Using on shopper administrations, for example, amusement, is prone to fortify as livelihoods climb. Chances are human services using additionally will get as purchasers and suppliers get used to the new runs the show. Furthermore using on utilities will settle once vitality costs quit falling.

In addition, it proceeded with an employment development and buyers who feel more secure may trigger more-powerful pay and using builds, pushing development over the 3% imprint — if not in 2015, then in 2016. Yet despite the fact that there's a probability that climbing investment rates one year from now will have a depressive impact, thumping up to a large portion of a rate point off development, we don't suspect that.

Well… By looking at those information, we can for sure jump in the US markets for liquidity and trading prospects. However, we do not know yet if the economic superpower will reach its peak soon. Only time will tell us.
Warren Tancredi By: Warren Tancredi
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