Recap on major events that rocked the global financial markets in 2016

It's been quite a while since my last blog post due to my hectic work. Seeing my fellow co-bloggers GoHuat and YoloHuat contributing their pieces, I should do my part too now that I have more time to spare towards the year-end. 

2016 has been an eventful year with lots of surprises. In fact, big surprises that sent markets into a tailspin. In this post, I will recap some of the notable major events which roiled the global market as we wrap up 2016 and for you to ponder what's next for 2017.

Chinese market rout

In January 2016, the global market was badly bruised by the Chinese market crash. The China's stock market fell nearly 18%. The rout sent shockwaves throughout the global stock markets due to China's growing influence and role in the global economy. The Chinese yuan fell to its lowest level since March 2011. This made their exports more competitive and caused alarm on whether it would lead to a currency war between countries. With China becoming an economic powerhouse, how would their assertiveness impact the world? I believe they will continue to grow further and increase their influence in the global stage.

Brexit

In late June, we experienced the UK Brexit which many thought it was logical for them to remain in EU. However, those people who were left behind in the midst of the economic growth resulted in an imbalance which swung towards the vote to leave EU. As a result, the Eurozone markets continues to be mired in uncertainties following Italy's rejection of the constitutional referendum. Will Italy be another casualty to end the EU membership? Italians may evaluate the EU membership using UK as a case study. 

US Presidential Election

In early November, the US electorate was another major bombshell. The unexpected happened - Donald Trump was elected as United States' 45th President. Many thought that it would impact the global markets due to his isolationist policies. Indeed, the market suffered a short-term whammy but it recovered quickly and caused a bull-run when people speculated that the Trump would implement pro-business policies and drive infrastructure spending to boost the US economy. However, there are also many speculations on how US stand to gain after Trump openly rejected the TPP which is supposed to benefit the US, including Singapore. In any case, Trump's presidency heralds a new era of uncertainties come 20th January when he takes office. Maybe it's time to follow Donald Trump on his Facebook or Twitter to get first-hand news? :p

OPEC to cut oil production

In late November, OPEC finally managed to broker a deal with the cartel's members and other non-OPEC countries such as Russia to cut oil output for the first time in eight years since December 2008. This news sent the oil price soaring and led to markets riding on the rally. The decision lifted oil prices to above $50 for the first time since October. Though OPEC's decision was widely welcomed, it remains to be seen if the jump in oil prices would be sustained as US shale production are expected to join the bandwagon and exploit the higher oil prices as well. Will this help to cushion the impact faced by the oil & gas counters in Singapore? For consumers, it just means higher prices such as vehicle petrol, consumer products, inflation. Boo hoo.

FED interest rate hike

On 14 December 2016, the long-awaited FED finally announced to raise the FED's benchmark interest rate by 25 basis points, to a range between 0.5% to 0.75%. While the interest rate hike is bad news to homeowners and investors alike, it is a reflection of the improving outlook of the US economy so as to prevent it from overheating due to the past years of low interest rates environment. Moreover, FED also hinted they could accelerate the increase of rates at a faster pace in 2017 (up to 3 more raises projected). The beneficiaries are the banks while reits would be impacted. Singapore companies with US denominated products will stand to gain. But how much higher will the rates go when Trump takes offices in Jan 2017 remains a big question mark. Is it time to put your funds in the US market as the USD continues to strengthen? Well, it may be prudent to wait and see. 

What will happen in 2017?

With the impending subdued economic outlook next year, I am not so optimistic for sure. The incoming Trump administration will be something new for US citizens and the world. The US-China relationship will go through a new test. The rising oil prices may result in higher cost for airlines and may not help to lift oil & gas counters who were already hammered by the drop in oil prices earlier. The upcoming interest rate hike is going to cause many counters to increase cost, especially reits and utilities counters. 

It seems to me that 2017 will be a more challenging year amidst the slowing growth of the global economy. Challenges are abound so it is timely for you to review your portfolio and tweak accordingly where necessary.

For me, I would likely wait and see how the events unfold, especially, once Trump becomes US President officially and announces his slew of policies which tend to shape the global outlook.

Do you know of any other events which are also major? How will these events impact your investing strategies? Feel free to share your views. 

Thanks for reading and wishing all TripleHuat readers a happy new year 2017!

Regards,

EzHuat

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