Monday, October 5, 2015

Bob Janjuah on China and the US Federal Reserve

CHINA

China’s devaluations are not over yet. There is more weakness ahead — both fundamentally and within markets — over the fourth quarter and perhaps into first-quarter 2016.

Fed and Rate decisions

Clearly QE4 has to be in the Fed’s toolkit. However, considering the failure of global QE to generate sustainable global growth and inflation, and considering the Fed’s starting point, 2016 could be the year when we see negative Fed Funds as a way of getting money velocity moving up rather than down.

Such a move may work, in that risk assets could react very positively for a period of time, but in the longer run any such moves would only serve to highlight the extraordinary ongoing failure by global central banks to manage economies (both into and) since the 2008-09 crash.