Macroview of November 2015 from Peter Cameron, Associate Fund Manager, EdenTree Investment Management

The momentum of the previous month failed to keep pace in November as markets offered more modest returns. Stronger than expected employment data in the US further reinforced the view that the Fed’s long-awaited first rate rise will now occur in December. In contrast, a UK rate rise has potentially become a more distant prospect following dovish comments from Bank of England governor Mark Carney and CPI inflation figures that remained in negative territory. Carney’s comments triggered a sell-off in Sterling, which fell more than two percent against the dollar. Elsewhere, in Europe the ECB president Mario Draghi stated that a sustained turnaround in core inflation had somewhat weakened in recent weeks, further confirming the likelihood of additional ECB stimulus in December. Political developments during November included a new government being established in Portugal on an anti-austerity mandate that may bring it into conflict with the ECB over the coming months.

2015 will go down as a year that has been characterised by diverging monetary policy around the world. This will be more evident than ever in the final month of the year, as the Fed almost certainly moves to raise interest rates while the ECB decides to ramp up its QE programme. Many of today’s market participants are too young to have worked in a rate-rising environment; the Fed has held rates at 0.25% since the end of 2008 but last raised rates in June 2006, almost a full decade ago. Investors’ focus for the year ahead will very much be on the pace and magnitude of Fed action as the rate-hike cycle finally gets underway.


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