INVESTING AWAY FROM DEVELOPED MARKETS
A big macro theme for 2013 is a continuation of one that we have seen for the last few years – the push away from so-called developed economy currencies, because they are expanding their central bank balance sheets and fiscal policies, broadly speaking. Europe is still having a debate over this. But we have seen a push from the other developed economies through expansion of fiscal stimulus policies and central bank balance sheets. This is especially true of Japan. Japan's central bank has a big balance sheet. It has been relatively stable over the last few years, and now it looks set to expand.
MIDDLE EAST TENSIONS
Another big macro theme is the Middle East. In my opinion, the conflict within Syria has elements of being a proxy war between the Western powers and Iran. This is different than all other Middle East conflicts we have been through over the last few decades, in my opinion. Iran has a large population of roughly 75 million, and the territory is very tricky. Also, Russia and China are not going along with the West on this one. Moreover, I think the internet makes it easier for the Islamic populations of Asia to see affiliations between the Western powers and Israel, which could increase “street tensions” across the region.
POLITICAL & FISCAL CONCERNS IN EUROPE
Europe is likely to continue along its current path – namely, an ongoing debate between austerity and a more powerful and accommodative central bank, with authority similar to that of the U.S. Fed, the Bank of England, or Bank of Japan. The outcome of this debate could be swayed by specific events, such as elections in Italy. Former Prime Minister Berlusconi has said Italy should consider leaving the euro zone if the ECB, the European Central Bank, does not behave the way he thinks it should. In the UK, all three major political parties may find it difficult to avoid their constituents overwhelming opposition to all elements of the European Union. It will be very hard for UK politicians to ignore this sentiment. They probably will find ways to ignore it or distract attention from it, but this also is something to watch in 2013.
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