Thursday 28 January 2016

The Fed tapers off on tough talk

The Fed delivered much of what was to be expected last night and decided against a move to hike rates further pointing to the risks posed on the US economy following the last month of financial market turmoil stemming from China. The FOMC said that they were "watching developments closely" as the implications of such turmoil had the ability to unhinge their economic outlook.

We saw in Davos last week a number of policymakers on the charm offensive in a veiled attempt to flatter the market with an abundance of confidence that has been lacking for a number of weeks now. The Fed's move yesterday just confirmed what the market believed that their is a degree of anxiety amongst those in decision making positions as to the direction the world economy may be taking after a failure to kickstart growth to levels that would be required by falling below par.

Although still early in the year it would seem that the Fed's optimism in lifting rates at a "gradual" pace would have the market think that may be overtly positive on the condition of the US economy and should such an interest rate pathway be pursued it may lead to an undoing to the little good that has come from the Fed's most recently departed dovish era of low interest rates accompanied by vast amounts of dollars being flooded into the market.

In all realism, this simply won't happen as the Fed understands how the role of stimulating world economic growth has shifted from China to the US as investors seeks out any little growth they may find as the effects of those who have favoured globalisation in bias towards the "Sleeping Giant" are now suffering the consequences of over reliance and subsequently contracting at a dismal speed thus causing further panic in the sphere of emerging markets.

But not without harm being done after a protracted period of "free money" coming to an end and beginning its journey back home aiding the strength in the US Dollar which has as many knock on effects as the crisis happening in China.

Inasmuch as the Fed tries to abate the negative effects of interest rates on the global economy it is unable to control those sectors that fall outside its realm of control. One that comes to mind is the price of oil sinking below $30 for the first time in 13 years. The impact of lower energy costs hurt inflation forecasts tremendously and as a result will tie the Fed's hands up when it comes to crunch time with the likelihood of a resolution in that market looking ever improbable of finding settlement anytime soon.

The result means we could see a bleak 2016 with market skittishness remaining for most of the year until some sort of certainty can be found in terms of a strong enough economy able to stabilise the entire mix of problems currently being experienced in the market.
Facebook flexes its muscles as the leader in social media

The world's biggest social networking site Facebook blew the market away with its fourth quarter results that indicate growth remains strong, really showing its pedigree amongst its competitors, The internet based giant reported that it hit a record 1.59 billion users of the service becoming a preferred outlet for advertisers to place their marketing campaigns in an effort to maximize the benefit to the full.

The figures speak for themselves and it would seem the company is taking things in its stride to stamp its authority on it competitors. With exciting new features coming in 2016 the future looks bright for Facebook.  
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