The Gold Report: We are only a month into 2015 and already the economic news has been dramatic. Switzerland decoupled the franc from the euro. The European Central Bank (ECB) has announced quantitative easing (QE). The Russian ruble is crashing along with oil prices, but the U.S. stock market seems to be soaring. What indicators are you watching and what are you expecting in the global economy in 2015?
Pamela Aden: Never a dull moment. The biggest beneficiary of all this turmoil has been the dollar. The dollar index is at 10-year highs. Meanwhile the euro and the Canadian dollar have gotten caught up in a deflationary cycle along with oil and commodities.
Mary Anne Aden: We are watching the exchange rate and the cross rate. The strength of the dollar is the key because it has become the world’s favorite safe haven in these times of uncertainty. Everyone is quite concerned about what’s coming next. With the renewed liquidity from the ECB and the Bank of Japan, the decoupling of the Swiss franc and the collapse of the oil price, fundamental factors like gross domestic product and debt levels have almost been tossed by the wayside. The wild events in currency markets are impacting the stock markets in a big way.
PA: It is also having an effect on the bond market. A year ago the bond market bottom was rising. It became one of the biggest surprise investments for 2014. Even the end of QE in the U.S. in October didn’t preclude another leg up. We think the bond rise is going to continue this year. And with all the liquidity in the system, the stock market could keep rising too.