Markets in 2014, especially stock markets, have done well.
While it hasn’t been all smooth sailing, as we saw in October, 2014 saw the emergence of growth in the US drove stocks higher and saw a generalised bid tone in risk assets around the world.
2015 is going to be very different according to TD Securities in its 2015 Global Outlook – Rates, FX and Commodities Research released overnight.
TD says that because global deflation has taken hold as, “Chinese, EM, and Eurozone growth remains soft and supply keeps oil prices low.”
That means that traders are faced with a “more uncertain macro and market environment and suggests limited scope for rates to rise globally.” It also means that TD has delayed its rate hike expectations for the G10 other than the Fed and Bank of Canada.
That means that TD wants to:
- Be long the US dollar, even though it’s a crowded trade
- Sell the Aussie dollar (amongst others like the CAD, SEK and Yen)
- Neutral stocks because low growth is hand-in-hand with disinflation at the moment (I’d argue it’s the absolute cause)
- Be short (sell) emerging markets against the US dollar
- Think oil is going to remain weak and are selling silver against gold
- Be slightly long volatility as global rates drift higher with the Fed in play
Here is a detailed snapshot of their core views: