This year will be dominated by the interplay of accelerating growth and the withdrawal of stimulus from central banks globally, CMC Markets chief market strategist Michael McCarthy told InvestorDaily.
“It’s interesting to note the different reactions we have seen just in the last trading week,” Mr McCarthy said.
“Initial reaction to US jobless numbers was a little muted or slightly positive. Once it became clear that this wasn’t going to have an impact on Fed thinking, that those weak numbers weren’t going to defer tapering, the reaction on Monday of the US was very negative,” he said.
“Last Tuesday, despite hawkish comments from Fed members, the markets had rallied back.”
Unfortunately for investors, this is likely to be a recurring theme, Mr McCarthy said.
“The market hasn’t made up its mind whether it is positive or negative about the interplay of these two themes, and that is understandable.”
As a result, CMC Markets expects to see fund managers shaping portfolios over a shorter timeframe as they respond to the evolving environment.
“Index hugging this year is unlikely to be the most profitable strategy,” Mr McCarthy said. “How well each fund does obviously is going to be a product of how well fund managers deal with that active investment environment, but we do expect a pickup in transactions.”
