Brent oil is off another 3% today, taking its decline since the end of last year to 20%. This is overshadowing other macro-economic forces. With the Federal Reserve among the least likely central banks to respond, the dollar is firm, even if within recent ranges.
Although the end of 2014 was brimming with some positive articles about the improving state of the United States economy despite Obamacare, the Dept. of the Interior, and the EPA holding back millions of Americans from improving their lives, some experts remain skeptical about whether America has overcome all of its financial problems.
U.S. equities saw a fall and recovery amidst greater uncertainty about falling prices in Europe and in the U.S.
The S&P 500 saw three straight days of steep declines before reviving at the end of this week, leaving the index down nearly 1.3% for 2015. The tumult in prices caused the volatility index, or VIX, to peak near 23 before closing at 17.01 on Thursday afternoon. Treasuries also saw mixed movements, with the 10-year Treasury yield dipping below 2% on continued fears of disinflation, only to recover to 2.01% by the end of Thursday.
The US dollar began the New Year with strong gains against both major and emerging market currencies. Comments from the BOJ’s Kuroda and ECB’s Draghi underscore the divergence between the US and other high-income countries. The former discussed other tools useful to help achieve the BOJ’s 2% inflation target.
French economist Thomas Piketty rejected an honor from the French government, dismissing the award and urging French policymakers to focus on growth.
Saying that it is not government’s role to decide who is honorable, Piketty rejected the Legion d’Honneur, an award founded by Napoleon Bonaparte at the beginning of the 19th century. The French government announced the winners of the prestigious award, which recognizes achievements in economics, research, culture, and public works.
American home prices fell slightly in the latest data, but consumer confidence has reached a yearlong high as cheap oil spurs higher consumption.
The S&P Case-Shiller index saw a 4.5% year-over-year rise in home prices, but that included a 0.1% month-over-month decline in October prices compared to September levels. While the data was in-line with economists’ expectations, some analysts say that the slowdown may continue in 2015 as the real estate recovery slows to a more normalized rate of growth.
Several economists at investment banks have predicted strong and improving economic growth in 2015, leading to growing confidence in higher interest rates for U.S. bonds.
Goldman Sachs has published its forecasts for 2015, which predict global GDP growth of 3.4%, above 3% growth in 2014 as both developed and emerging markets see growth acceleration from the prior year. Developed markets expect to grow 2.2% and emerging markets 4.9%, both higher than the 1.9% and 4.6% rates of 2014.
The Federal Reserve is optimistic about economic conditions, and many in the central bank are predicting more Americans will find full-time work in 2015.
U.S. GDP grew at a 5% annual rate in the third quarter as consumers and businesses spent more thanks to lower oil costs and growing confidence in the economy’s future.
Industrial production surged to its highest level since 2010 in November after three solid months of gains. Industrial production rose 5.2% year-over-year in November and manufacturing rose 4.8% year-over-year, signaling continued confidence in the economy from the industrial sector.
