A difficult start to the year

Hopefully the rest of the year will help us forget the horrific start of 2016 where over a few days all hard earned gains from 2015 were wiped out. If morning shows the day and January is a prelude for things to come then 2016 will definitely be a difficult year.

From where I sit I am definitely not hoping for a repeat of 2015; when we had a magnificent rally right up to April. The rest of the year was a mess of corrections, rallies, sell-offs and hope. By the end of the year markets had lost most of the gains. What was left went away in January.

The following are the main themes to look out for this in the next few months.

Eurozone

I am not a huge fan of any type of market intervention and quantitative easing is at the top of my list. My belief is that authorities should allow markets to operate as freely as possible, intervening and regulating only to limit market dominance and abuse.

Northern European countries seem to have the same ideas, preferring to achieve economic sustainability through fiscal discipline and respect of rules rather than through emergency monetary band aids.

Pressure on ECB President Mario Draghi to follow their lead appears to be working and I will be surprised if we see any significant increases in European QE in 2016. Economic growth will probably still accelerate at a modest pace but it may be held back by lack of reform and political disorder.

US

The United States is experiencing an improvement in economic data albeit inflation, a key sign of price stability, remains abnormally low. Still further rates hikes are expected this year. In my opinion the Fed will try to push towards a more sensible interest rate while at the same time communicating economic optimism so as to not shock markets.

This environment will create uncertainty which may impact market confidence. The Fed will definitely do its best to boost confidence in the Economy. However, the outcome will eventually hinge on company earnings.

UK

The UK had placed itself in a difficult corner. I do not completely understand the reasoning behind Brexit. Still the UK leaving the EU is a probability with significant ramifications for the UK and probably more for the EU.