What do we foresee for 2016? We continue to expect the developed world economy to grow at an above-trend pace, having mostly resolved the key issues that depressed growth over the last few years: fiscal tightening, weak banking systems, risk of eurozone collapse, and corporate- and personal-sector deleveraging.
But there are risks on the horizon, too. 2015 marks the year the Fed raised rates for the first time in over a decade. How quickly will the Fed continue raise rates, and how will that affect financial markets and the economies of developing countries? We expect the impact would be significant.
"Diverging forces: normalization in US and UK, stimulation in Japan and the eurozone, and challenges in emerging economies"
As is always the case, our forecast is made up of a number of risks. While quantifying all risks that could affect economies and markets in a given year is impossible, we’ve identified and analyzed five main risks for 2016:
- The Fed gets aggressive
- EM crisis
- European fragmentation
- Geopolitical shock
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