The Federal Reserve has been on the minds of investors like Brian Bonar all year. Let’s be clear. The Federal Reserve is always in the back of investors’ minds, but this year has been a very strange year. Brian Bonar, the CEO and one of the directors of Dalrada Financial Corporation, knows how quickly the investment world can change when there is a glitch in the global market. The glitch this year is a big one. China, the leader of the top emerging markets in the world, had a major financial meltdown. The Chinese stock market lost almost 40 percent of its value, and the Chines government injected billions into the market to keep it from crashing completely. There were signs that the Chinese were headed for a meltdown, Chinese manufacturing is slowing down, and that means China exports are off as well, according to Mr. Bonar. In a global economy, exports are the glue that holds emerging economies together.
Mr. Bonar has extensive experience in the global business world. He worked for IBM Europe for 17 years, and he is an executive and a board member of several corporations. Bonar thinks the Federal Reserve is very concerned about China’s ability to recover quickly, and the Feds are also concerned that the economies of Brazil, Russia, and South Africa. The Feds and some investors think the BRICS countries will continue to experience a recession and a major bout of inflation through 2016 and possibly into 2017.
The Federal Reserve is very data-dependent, according to Mr. Bonar. The recent downgrade of Brazilian bonds and the fact that oil prices have had such an impact on the global economy left them no choice but to keep interest rates the same. The strong U.S. dollar and low inflation in the United States will help the U.S. economy in the short term, but if China doesn’t get a handle on their financial debacle quickly the U.S. economy will show signs of the global financial slow-down.
In fact, the Federal Reserve thinks the U.S. economy will slow down because of the issues that face the world. The oil situation, export lethality, and currency fluctuations along with several other issues will start to erode the American economy, according to the Feds. But those issues may not stop them from raising rates in 2015, according to Mr. Bonar. The Feds have their own way of interrupting the global signs plus they have their own agenda. So some investors are planning for a quarter of a percent increase before 2016. If that happens, some investors think it will complicate an already complicated global financial scenario. Other investors say oil prices will come back, and China will recover sooner than expected, and those changes will help the current economic outlook.