The US ended the year with the US Federal Reserve (the Fed) increasing interest rates in the December meeting, from 0.50% to 0.75%. The minutes of the meeting cited the potential for higher growth off the back of future fiscal spending. The Fed has forecast three further rate hikes in 2017 with the market 12 month forward rate currently at 1.1%, suggesting only two rises.
US equities went from strength-to-strength in December with a continued feel good factor over the prospect for income and corporate tax cuts and a fall in the unemployment rate to 4.6%. The S&P 500 index was up 1.98% during December and year-to-date, the simple return is up 9.5% in local currency. For UK investors, sterling returned to its downward trend, devaluing against the US dollar, which meant gains in the S&P 500 index, up 5.0% on the month. However, the US dollar has performed exceptionally well in 2016 against all major currencies bar then Japanese yen. The US dollar index, a measure of the US dollar strength against all currencies has performed well, up 3.5% on the year.
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