New Year, Old Challenges

New Year, Old Challenges

A new year is underway and investors are looking for signs of growth in the global market. The US managed to stave off the economic stagnancy that plagued markets in Europe and Asia for much of 2014, but some analysts fear those threats will catch up to American stocks and bonds, reported the Wall Street Journal. Meanwhile, European experts increasingly doubt the central bank’s ability to temper persistently low inflation and weak growth, according to MarketWatch.

New Year, Old Challenges
New Year, Old Challenges

On Friday, US stocks gained. The S&P 500 and Dow both added 0.6%, while the Nasdaq increased 0.8%.

US markets have their work cut out for them

The US stock market and other economic indicators proved their mettle in 2014 as monetary woes abroad had little effect on domestic strength, according to The Wall Street Journal. Particularly in the second half of last year, stocks surged even after the Federal Reserve ended its stimulus program. On the year, the Dow gained 7.5% and the S&P 500 added 11.4%.

On the other hand, the eurozone experienced slow growth and inflation remained well below the central bank’s 2% target. Japan fell back into recession, while China’s economy took a step back. The MSCI Europe index fell 8.6% on the year.

But some of those trends could reverse in 2015, according to William Kennedy, manager of the Fidelity International Discovery Fund.

“The US remains the bright spot in the world,” Kennedy told The Wall Street Journal. But from an investment perspective, “on the margin, things are looking a little bit better for the world outside the US … A couple of things that have been tailwinds for the US last year are going to be headwinds.”

Challenges linger for the eurozone

The European Central Bank is expected to enact a fresh round of quantitative easing in the beginning of the year, but investors are concerned these measures will be not be enough to bring the sector out of the doldrums, according to MarketWatch.

Italy fell into recession, Germany registered little to no growth and France’s expansion was a result of companies increasing inventories.

“Of all the central banks, the ECB has perhaps been the most innovative and best at thinking on its feet, but their hands are still tied and I’m struggling to see how buying bonds, even on a very large scale, will directly translate into economic growth – which is fundamentally what Europe needs,” Kevin Gardiner, investment strategist at Rothschild in London, explained to MarketWatch. “It’s just difficult to see any grounds at all for optimism in Europe in the near term. The glass is definitely half empty.”

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