Chris Caton: thoughts for shares and the A$ in 2016

BT Financial Group’s Chief Economist Chris Caton forecasts A$: 68 US cents, ASX 200: 5750 end-2016. What is crucial now is how rapidly the Federal Reserve continues to increase rates. The increase in the Fed funds rate seems to me to be a reasonable step. While it is true that the US economy is growing only slowly, and that inflation is remarkably low, it is also the case that the unemployment rate has improved significantly, and that most measures of earnings growth are signalling acceleration. The naysayers point to the fact that, since the GFC, many other countries, including Australia, New Zealand and the Eurozone began a process of “normalising” interest rates and then had to retreat. What’s more important, of course, is what rising US rates mean for financial markets, and particularly for shares. The short answer is that no-one knows, but given that the rises will take place slowly in the context of an economy doing reasonably well, there appears to be no reason to fear a dramatic reaction. More from Chris Caton here (VIEW LINK)