Consumer confidence has returned to pre-crisis levels, as the impact of private sector deleveraging and fiscal consolidation wanes.
A major question going forward is whether the US economy can continue to grow at current rates, while Eurozone growth remains constrained and China shifts to a lower growth setting. Lower oil prices should act as balancing force, boosting the oil importing economies, including the Eurozone. Our big call for 2015 is that in response to increased confidence and rising demand, business investment grows more rapidly and US growth becomes more self-sustaining, at least for a time.
The price of this shift in gear will be a rise in interest rates. The Fed have completed their QE programme and are signalling that rates are likely to rise at some stage in 2015. A shift in Fed policy will lead to increased volatility in markets, however since we think the chances of a co-ordinated policy tightening across all central banks are very limited, the fallout should be cushioned. A world of very loose monetary policy looks set to remain with us for some time.