The first half of 2015 was quiet and stable. Demand for properties began rising again and prices kept going up. Buyers’ offers and requests for refinance mortgages increased significantly during the third quarter of the year as a result of high volatility and consumers’ concerns about the new TILA-RESPA regulation. This regulation requires lenders to be more transparent and divulge information about their loans three days before signing the final agreement so as to protect borrowers. Property prices are much higher in 2015 than they were in the previous years and high profits are being generated thanks to tight inventory, decreased interest rates and the presence of buyers who can purchase properties in cash. Chinese buyers account for 35 percent of all international purchases of U.S. real estate.
Even though employment rates have been growing quite steadily in the United States, in September, payrolls failed to grow as much as analysts had predicted as only 142.000 jobs were created. The main reason why employment growth began slowing down is because the manufacturing sector is currently experiencing serious difficulties and the value of agricultural commodities is decreasing. Even though the above figures and data simply portray the main challenges that have been facing the U.S. economy during the past few months, it is evident that the detrimental effects of the 2008 financial crisis are still preventing the labor market from recovering fully. While real wages remained flat, consumer spending continued to increase, which contributed to the second-quarter real GDP growth at 3.9 percent

Job growth and inflation have positive correlation; thus, the slack in labor market drove the inflation continue to be too low at just 0.3 percent. However, decreasing oil prices are not the main cause of soaring inflation rates, as available data do not take into consideration food and energy prices, which reveal that inflation is actually below 1.2 percent. Numerous economists maintain that the U.S. economy is actually going through a “disinflation” stage. In September, economic stability was mainly threatened by excessively low inflation, issues affecting the Chinese financial market and an overall unsteady financial landscape that affected the Fed’s interest rate decisions in September. On the one hand, the Fed decided not to raise interest rates as the economy was still too unstable; on the other hand, experts believed Fed just missed a good opportunity for raising rates during the last nine years.

Seeing as analysts expect U.S. interest rates to rise by the end of 2015, investors’ decisions are causing the dollar to keep rising. The greenback grew by 25 percent, which resulted in great confusion within the Fed. It hurt U.S. exporters and led to a record of U.S. trade deficit, the excess of imports over exports, increased 15.6 percent. Many corporations also blamed the strong dollar for their poor revenues.
Likewise, the strong dollar is the number one enemy of gold. Since gold prices are in dollars, when the U.S. currency rises, the value of gold decreases significantly. Furthermore, if interest rates rose at the end of 2015, this would increase the opportunity cost of holding assets that generate no dividends, as investors would probably prefer investing their funds in treasury bills that would almost certainly return some profit. Moreover, gold prices have been low as a result of oddly positive political news. Specifically, following Greece’s bailout, Greek banks reopened and managed to pay back their main creditors. The United States and Iran signed a nuclear agreement and China’s demand for gold fell. All of these factors suggested that gold was not worth investing in, until its price reached its peak in October as the Fed showed no intention to increase interest rates until 2016, thus pressuring the U.S. dollar. The gold market is absolutely uncertain.

At the beginning of 2015, the European Central Bank (ECB) finally launched its quantitative easing program by buying bonds at a monthly rate of 60 billion euros to stimulate the economy and attack deflation. However, the quantitative easing alone was not enough to recover the economy. According to David Tan from JPMorgan Asset Management, at the moment employment and inflation rates are still too low and firms have been accumulating cash rather than investing their resources in an efficient way. The ECB also needs to ease the pressure of austerity on Greece after rescuing it in its third bail out. Many economists argued that Europe should have let Greece exit the European Union because this country constantly holds Europe back and “Grexit” was not really a financial disaster seeing as most foreign financial institutions and investors got rid of their Greek bonds a long time before the crisis. The questions most of investors now have is China. Analysts expected China’s decision to depreciate its currency this August to boost economic growth in the world’s second-largest economy; however, it did not have a positive impact on the fragile U.S. economy. Specifically, depreciation made Chinese goods even cheaper for international buyers and more expensive for domestic consumers. Most importantly, the devaluation was executed in order to keep employment rates steady. Only a limited number of economics argued that China’s move was unfair to foreign competitors. In fact, many U.S. companies that sell in China such as Apple and Tesla, suffered significant losses. Similarly to Europe, China began reducing its interest rates in November. Moreover, with its stock bubble, it caused investors to lose over $5 trillion.

While the first half of 2015 was roughly flat in financial market, the second half was the completely different picture. U.S. stocks fell sharply in August as concerns about sustained weakness in China exports and manufacturing activity sparked a global sell-off. The S&P 500 Index experienced its most severe monthly decline since 2012, while the Dow Jones Industrial Average incurred its most significant losses since May 2010. These data clearly indicate that the world is much more vulnerable to China’s economic trends than economists thought. As Peter Kenny from The Clear Pool Group noted, if anything negative happened in China, the whole world would be negatively affected by it. Monday August 24th clearly showed how vulnerable the U.S. economy is to China’s economic stability, as the Dow Jones fell by 588 points, thus representing one of the worst stock market crises in U.S. history. The S&P 500, the Nasdaq, and the MSCI Europe Indexes performed even worse than the Dow Jones.  Shanghai Composite Index decreased by 8.5%. As reported by MarketWatch, investors lost around 2 trillion dollars in just one day. In spite of that, the Japanese stock market has been positive since the beginning of 2015. Its solidity indicates that the Bank of Japan’s quantitative easing allowed companies to maximize their profits, also thanks to a weaker national currency; in fact, the USD/JPY rate remained stable at around 120.

Fed first rate hike would pushed back to 2016 gave traders more hope that made global markets rebounded at the beginning of October. The S&P500 gained 0.1 percent and the Dow added 0.3 percent, although the total return of both of indexes remained negative year to date at -2 percent for S&P 500 and -4 percent for Dow Jones. The calculation was up to Monday, October 12th. On October 12th, the technology sector witnessed the biggest M&A deal ever, with Dell acquiring EMC at $67 billion. The biotechnology sector was under pressure as Hilary Clinton requested regulators to impose tighter controls on drug pricing. The small-cap Russell 2000 also outperformed the large-cap companies. Oil prices have recently risen to 9%, reaching $50 per barrel as a result of various factors, one of the main ones being Russia’s decision to fight the Islamic State in Syria.

Investors returned to slightly riskier asset classes, thus reducing demand for U.S. Treasury bonds and causing the return on the US ten-year Treasury note to exceed 2.10%. As investors became less reluctant to take risk, demand for low-risk corporate bonds grew quite significantly. As a result of growing oil prices, bonds issued by energy providers performed particularly well. High yield bonds also exhibited positive trends as a result of rising equity markets.