• Political corruption, civil war, annexation, election results good and bad – geo-political risk returned in 2014 having a significant impact on markets. Meanwhile, central banks were busy going in opposite directions, but nonetheless contributed to volatility. Oil prices dominated the end of the year, plunging Russia into crisis, but leaving some upside risks for 2015.
• Investors saw good returns from both government bonds and equities. Shrinking flows of government debt instruments may have helped lower yields against a backdrop of growing liquidity. In equities, only the US index outperformed in USD. Japan had a good year in JPY, but was still down in USD, while European bourses struggled with poor earnings.
Global themes for 2015 (page 12)
• The latest fall in oil prices moves the cost of energy well below the assumptions we used just a month ago to form our baseline. The decline will add to pressure on commodity producers and energy firms, but overall the clear implication is that growth will be stronger and inflation lower as a result.
• Some might term this a "disinflationary boom" and that is our first theme for 2015. Three other themes: the "desynchronised cycle", where the US continues to lead the world economy; "Japan: winning the currency war", where Japanese firms use the latest move in the JPY to gain market share; "Back to the 1990s" whereby the Federal Reserve is distracted by external events, keeps policy too loose and fuels a domestic bubble.
Views at a glance (page 18)
• A short summary of our main macro views and where we see the risks to the world economy.
The full Viewpoint is available below.
Economic and Strategy Viewpoint
In this month's Viewpoint: 2014 review: Geo-political risk and USD dominate, global themes for 2015 and views at a glance.