Financial Markets: A Balance Sheet

2014 is over and we can take stock of an eventful year in the financial markets. According to Yves-Michael Kazadi, Investment Analyst at Columbine, global growth in 2014 resembled a plane with four engines, only one of which is running well.

 

Emerging countries are losing speed

Emerging countries are losing speed

After the clear correction during the first half of the year following the announcement of the gradual rise in US interest rates, the currencies of many emerging countries were attacked by the financial markets and saw a lot of capital run off. The attack was mainly aimed at countries with a balance of payments deficit (synonymous with a lack of competitiveness) and therefore less at the countries in Southeast Asia. Nevertheless, the emerging regions (in particular Africa and Brazil) also suffered from the slowdown in growth in China. The Chinese glutton was less hungry and that translated into a decrease in the volume and value of raw material exports. In the meantime, Russia is struggling with the consequences of the West embargo and the accompanying fall in oil prices. China, for its part, recorded a growth of just over 7%. Although the eurozone has faded from jealousy with such growth rates, these numbers are far removed from the double growth rates of recent decades. China, too, is going through a phase of delay and sees various dangers looming around the corner: credit bubble, anti-corruption policy (negative impact on luxury products), environmental risks and aging. The result: investors and investors are more selective with regard to emerging countries.

 

The eurozone is struggling

The eurozone is struggling

Growth came to a halt in the euro zone. Not only do the unemployment rates break historical records, but the confidence of both consumers and entrepreneurs also does not inspire optimism. On the other hand, the results of the banks’ stress tests were not bad and should give economic players more confidence in the future. But unfortunately, despite everything, these results have to be interpreted with caution, partly because they do not take into account the impact of any deflation on the banks’ balance sheet figures. The official interest rates may be almost zero percent, the growth of the eurozone does not pick up significantly and remains hovering around 0%. In the meantime, with an inflation rate of 0.3%, the eurozone is in danger of ending up in a strong exogenous shock. Even worse, even the best student in the class, Germany, has discovered that it cannot isolate itself on an island and ultimately suffers from the weak economic climate of France and Italy.

 

Japan is slowly coming out of deflation

Japan is slowly coming out of deflation

The policy in three phases of the new Japanese Prime Minister Ebi has raised hope. Yet it is clear that the 3rd largest economy in the world is unable to get out of the slop, which has been entangled for decades.

 

The United States leaves the crisis behind

The United States leaves the crisis behind

The only region in the world that brightens up and seems to leave the crisis behind for good is the United States, with satellite countries such as Mexico. And although the way out of the crisis is difficult compared to previous situations in the past, it would be out of place to see a stumbling block with a rate of GDP growth of more than 3% in 2014. Despite the still limited growth, 80% of the macroeconomic indicators are positive and the earnings figures of the companies seem fairly solid. In short, despite the rise of the dollar in recent months, US companies are able to absorb this evolution of the currency, in particular thanks to the profitability efforts and the fall in energy costs (shale gas) of the past. years.

 

And what about the markets?

And what about the markets?

With regard to the financial markets, and in particular the bond markets, 2014 was a good year for those who wished to fall in interest rates, although the experts’ consensus assumed the opposite. The fall in interest rates has unfortunately had a negative impact on bonds in most cases, except, for example, for those who have chosen high-yield bonds. With regard to equities, the most profit was to pick up – by surprise – the US shares and the shares of the Bel 20. Our securities market did not stand still this year, unlike other European markets (such as the CAC 40). Investors who have taken a position in return shares (who regularly pay large dividends) will also look back with satisfaction on 2014.

 

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