The world looks in good shape to cope with the tightening in US monetary policy which we think will, finally, begin later this month. The November Employment Report confirmed that the US economy is still recovering, despite the pain being inflicted on the manufacturing sector by the appreciation of the dollar. Business surveys indicate that the euro-zone’s steady recovery remains on track and that, contrary to the more alarmist reports, growth in China has stabilised. Although yields on corporate and emerging market bonds have drifted up in the past few months, there has been no repeat of the “taper tantrum” of 2013. Financial markets should, therefore, take the first US rate hike in almost a decade in their stride.
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