Opening Statement from the January 2016 CCPM Forecaster

Opening Statement from the January 2016 CCPM Forecaster

Originally published on January 3, 2016

We have been discussing our forecast of a December 2015 rate hike of 25 bp for more than one year. On December 16, 2015 the Federal Reserve raised short-term interest rates by 25 bp and issued a dovish statement reflecting future rate hikes.

This rate hike serves more as a symbolic gesture for the Fed since it was the first time rates had been increased in nearly a decade. Moving forward, we will be particularly focused on attempting to forecast the pace by which interest rates will be raised in coming years.

As we have stated for quite some time in the Intelligent Investor and Market Forecaster, based on the current macroeconomic landscape, we believe short-term interest rates in the US will...

Turning our attention to commodities, deflationary concerns have sparked another wave of bearish bets for most commodities, led by crude oil. The persistent bear market in commodities has been justified by macroeconomic fundamentals. These demand-related fundamentals could eventually spill over into the overall stock market. In fact, we already see some potential early signs of this.

For several years we have been discussing our concerns of weak global demand as the primary cause of global disinflation and periodic deflation in select nations. This persistent trend of reduced output has been responsible for the deflation of the commodities bubble and a reduction in global economic growth rates.

We have also been pointing to the weakness in emerging economies as a direct cause of bearish commodities pricing. On the demand side, commodities pricing has also weakened as a result of...

In October 2015, we reminded readers of our forward-looking analysis from early-2010 (Intelligent Investor). First, we reminded readers that the global economic stimulus created sufficient demand to refuel the manufacturing engine of global commerce, namely the emerging markets. The only problem was that this stimulus was not focused on creating lasting demand. Thus, unless the structural issues had been resolved, the global economy would begin to weaken by mid-to late-2011. This is precisely what happened.

Moreover, we concluded that the damage caused by the financial crisis would reduce US economic growth for an extended period; at least twelve years. We also reminded readers that global growth would remain low for many years. The IMF has only recently reached these same conclusions (search for World risks ‘persistently’ weak growth: IMF).

Over the past several months it appears that most analysts, economists and strategists have...

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