EDITOR'S LETTERMerryn Somerset Webb
Keep it simple in 2016
We didn’t know it at the time, but when we launched MoneyWeek 15 years ago, we did so into the beginning of an extraordinary period for economies and markets – one that will still be being used as a case study of policy madness in financial history courses 300 years from now; one in which governments handed over almost full responsibility for their economies to central banks – who then messed it up.
Turn to our markets section (or read Bill’s thoughts) and you can see the results. Years of super-low interest rates and quantitative easing, imposed by central banks terrified of low growth in the West’s debt-ridden economies, have left us in a horribly unstable situation. Cheap money has blown bubbles all over the place. And those bubbles are beginning to pop.
Commodities are down and out already, with the oil price at 2004 levels. And the Chinese stockmarket has had its crash. But other nasties are brewing. Keep a close eye on junk bonds and London houses. They may be next. I suspect that when 2015 is being taught to incredulous students in 2115, it will be seen as a turning point in the central bank cycle – the last year in which we all clung to every word every central banker said, believing that they really could control markets.
By the end of 2016, as the US and the UK both try to normalise rates (and those in their 20s experience their first ever rate rise as adults!), we’ll know they can’t and will, I hope, return to looking at the fundamentals when we consider investing.
The next issue (out on 8 January) will be all about these fundamentals.
• Read the full editor’s letter here: Keep it simple in 2016