Much like 2015, the next 12 months are likely to be a long and strange journey for equity markets, writes Instreet Investment's George Lucas.
Overall, the global economy is expected to pick up and around the world we are anticipating:
Unfortunately, investor confidence will remain weak and influenced by central banks. This will continue to lead to volatility in the markets.
Finally, currencies will once again play a major role. The US dollar strengthened by almost nine per cent this year and we expect this theme to continue.
2015 was widely expected to be the year in which the US Federal Reserve lifted interest rates for the first time in almost a decade.
But as the end of the year approaches, the most anticipated event for 2015 (as far as markets are concerned) is yet to occur.
All in, it’s been a turbulent ride as far as interest rates are concerned.
Firm views that there would be a rate rise in the second half of the year gave way a couple of months ago on the back of the summer panic over China.
But now a rate rise is back on the table, and we believe the Fed will shake off the scrooge and don a Santa suit to give the gift of a rate rise at its December meeting.
This comes after the broadly positive US employment report for November.
Markets end the year where they started
As far as stock markets are concerned, the major markets will finish 2015 almost exactly where they started (in US dollar terms).
European equities were expected to post more impressive gains for 2015. But with the China crisis, the midsummer mess over Greece, the Volkswagen scandal and poor corporate results, European equity performance capped out.
The European Central Bank started the year reluctant to ease monetary policy but was obliged to do so to support its economy. Indeed, the ECB cut rates and extended quantitative easing again last week.
Here in Australia, the economy performed above expectations. But it was not enough to starve off negativity in equity markets which were affected by continued weakness in commodity prices, bank capital raisings and the Brazilian dam disaster at the BHP-owned mine.
George Lucas is the managing director of Instreet Investment.