Equity markets continue to mark time as the thanksgiving weekend approaches. Mark Carney appeared before a parliamentary committee on Tuesday with two other MPC members, one being Ian Mccafferty who voted for an interest rate rise at the last meeting. Not a lot new appeared to come from the exchanges except a concession that the economy may be doing slightly better than the data suggests and therefore the next rate move will probably be most definitely up. The tone of the comments from the MPC may have been considered slightly more hawkish (in favour of a rate rise) than on other occasions, but gilt yields did not reflect this, hardly moving on the day.
The US released its latest Q3 GDP estimate; it came in higher than expected at 3.9% though lower than the second quarter rise of 4.6%. Bond "Guru" Jeffery Gundlach interviewed on CNBC was quoted as saying he believed the Fed might raise rates "to see what happens". That feels like an interesting theory, and maybe a tad gung ho. What if nothing happens, do they raise again? What happens if they do and markets react badly do they cut it back? One can only hope that central banks policies are in general a little more sophisticated than let's have a go, prepare for the worst hope for the best. In the mean time the S&P 500 continues to climb higher.
It is fast approaching that time in the year when strategists, economists and research analysts will be asked to focus on their recommendations for next year. One would imagine the central theme would remain cautiously optimistic on equities as rates will remain low, inflation subdued and economic growth will remain real if modest. The main topics of discussion will surround what happens to the US dollar and in turn commodity prices. One gets the feeling other topics for discussion next year will be along the same lines as this, when will the Fed raise rates? Will the ECB do full blown US style QE? Will Abenomics kick start the Japanese economy after 20 years? Is China going to face hard landing? As there has been this year and to some degree 2013, one feels at some stage during the year these themes will all have their part to play in offering periods of worry, but it should also ensure that government’s focus remains on stimulating the global economy not slowing it down.