Larger US budget deficits will ultimately be financed by the Federal Reserve through monetary creation which promises to bring depreciation in the dollar both in terms of its foreign exchange rate and in terms of its domestic purchasing power. All these factors are very positive for gold over the longer run as is the strength of demand that will come in from Asian economies.
The failure of governments to reach a binding climate deal in Copenhagen has dented the confidence of carbon traders. They are now anticipating a global carbon price of €31 in 2020, compared with the €35 they were predicting last year. The carbon price is key to determining the extent to which carbon markets expand in the future.
Morgan Stanley’s equity team says that it is too early to purchase stocks. It feels that the risks remain too numerous to ride the recent uptrend in stocks. The 1994 and 2004 recoveries suffered through several quarters of range-bound and lower prices. Both years, the market stumbled as investors tried to digest the beginning of the Fed’s tightening. Morgan Stanley believes that the global tightening phase has already started.