Schroders global outlook for 2016

We devote a lot of our time to assessing risk/reward opportunities. In our view, the rewards on offer to the Federal Reserve (Fed) and the US economy in keeping interest rates at zero were exhausted some time ago. The risks, however, particularly in financial markets, have continued to build. I’m writing this piece in the second half of November, 2015, and as things stand it is anticipated that the Fed will begin the process of normalising monetary policy at its mid-December meeting, albeit in exceptionally dovish fashion. So, here are a few things we consider to be relevant: 1) The global economy has not delivered. At the end of 2007, the global stock of outstanding debt was $142 trillion. Since then the world has added an additional $57 trillion of debt to its balance sheet. 2) This record debt burden has been encouraged by global central banks and supported by near zero rates. 3) Most financial assets have re-rated significantly on the back of near zero rates as it has encouraged investors to take more risk. (VIEW LINK)

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