Global themes on one page for February 2016

The global themes have changed radically in the last month. At the beginning of January, the market was thinking about four moves from the Fed in 2016, higher growth, and global monetary divergence. Now, the markets have growing fear of a recession albeit about 20%, a Fed that may be done in 2016, and monetary convergence as all central banks become QE-followers. The most likely reality for 2016 will be somewhere in between these extremes, but the fear of deflation, recessions, and adverse credit and capital flow is real and points to a more volatile year. We think the RO/RO environment seen between QE transition periods is a a good starting point for any strategy discussion.