With the US economy on the mend, the focus will likely soon shift to when the Fed will start to raise interest rates. This could cause some volatility in shares.
- However, a Fed rate hike is probably still a year away at this stage and history tells us that it’s only when rates reach onerous levels that they become a real threat to share markets and ultimately economic growth.
- Rate hikes are further away in the Eurozone and Japan, which may still need further monetary easing.
- Steady progress towards eventual rate hikes in the US will further relieve pressure on the $A over time.