The Hedge Fund Journal highlights Sir Michael Hintze’s thoughts on the key investment themes for the year, which were outlined in the latest CQS investor report "CQS Insights: Looking to 2014."
Looking at the year ahead, Sir Michael highlights several key issues that will impact the markets:
As we look forward into 2014, I see more 'pot holes' than 'black holes'. While Taper seems inevitable, central bank balance sheets globally will continue to grow as Quantitative Easing (QE) itself is not going away. It is the rate of growth of the balance sheet that is being 'Tapered'. Markets have run a long way and expectations are high. However, I think the overall direction of markets is probably upwards, albeit at a more moderate pace than in 2013. Taper will also be a sign of confidence that the Fed believes the US economy has its own escape velocity and the financial system's stability has returned. Having said that, a 'pot hole' arising from general market complacency around Taper, a miscommunication on forward guidance or renewed concerns around the Eurozone are all imaginable.
Sir Michael also tackles important questions about how the major economies will develop during 2014 and potential risks for developing economies as Taper takes hold.