“It is also a sea change for market participants who will now shift their focus onto pastures new instead of being so transfixed on that first hike which many perceived as the primary market risk.”
The UK’s highest profile investor Neil Woodford struck a cautionary tone in his commentary on the situation however. Woodford warned that the Fed risks instigating ‘currency wars’.
He said that although the rate rise appears to be justified from the point of view of the US economy, it is far from ideal for most other parts of the world. This is particularly true of China and emerging markets generally, in Woodford’s view. He said the squeeze they feel as a result may prompt the Chinese authorities to devalue the renminbi in the hope of boosting its economy and ‘sharing their economic pain with the rest of the world.’
