Debt dynamics: Why 2015 rate rises will be a "substantial mistake"

The heightened sensitivity of corporates to rate rises is holding back capex and wage growth, and as the recovery remains frustratingly slow, it would be a huge mistake for the Fed to raise rates next year, argues City Financial's Mark Harris.

To date, 2014 has been a sobering year for most strategists and investors. Entering the year, consensus expectations were for a sell-off in government bonds and strength from equity markets, led by Europe. These views have been very wrong. Government bonds have enjoyed an exceptional year, especially at the long end, while equity markets have struggled to make significant headway. The wrong prism A key mistake has been to study the current recovery phase through the prism of a ‘normal' market cycle. Despite significant evidence to the contrary, this consensus narrative was built...