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Are You Confused Yet?

Someone smarter than me once said that the markets confuse most of the people most of the time. I have a feeling they've confused everyone this time around. 2015 is shaping up to be an incredibly confusing year. We have this extremely strange confluence of events:

  1. The European economy came into the year with a fresh batch of QE as a tailwind, only to run into a wall of political back and forth surrounding Greece.
  2. China had a stock market boom, a stock market crash and massive government intervention.
  3. The US economy seems to be doing okay, but not well enough to justify the rate hikes which the Fed is intent on implementing.

In terms of the markets, this has led to widespread confusion about global stocks. Commodities have been trashed, largely thanks to China. Bonds have been trashed, thanks to confusion over the path of inflation and central bank policies. And the sum of all of this is that the financial markets have done either a whole lot of nothing or a whole lot of going down.

If you feel confused about 2015, you're not alone. The markets are increasingly random in short time periods. It's only as we take a longer and more cyclical view that many of the market's trends actually become increasingly predictable. As I said yesterday, beware the excessive emphasis on the short term...


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