With the Italian referendum out of the way, the market’s focus will turn once again on Central Bank activity, particularly Thursday’s key ECB meeting this week and next week’s FOMC meeting in the US.

2016 has been laden with key events, from central bank activity but more importantly political events and geopolitical tensions and it has been anything short of mundane. Well it depends on what mundane means to most.

Brexit, US Presidential Elections, Italian Referendum, tensions in Turkey, the Fed and ECB meetings coupled with the endless list of economic data across all regions of the world.

The improvement of US economic data, an uptick in inflation in the Eurozone, the strong recovery in EM (in the first nine months of the year), the continuous slowdown in Chinese economic activity, the strong dollar, a strong recovery in commodities, stability in the price of oil. These are all but a few of the events which characterised and continue to shape what’s left of 2016.

Volatility as measured by the VIX index indicates that markets were pretty volatile this year, with the measure recorded having been registered above the 15 mark on a number of times and for persistently longer stretches of time compared to recent years.

January, February, June and November have been unquestionably the most volatile of months, with December having the necessary ingredients to make the grade of being yet another volatile one, uncharacteristically for this time of the year it must be said.

All eyes are on Draghi’s conference on Thursday and on whether the governing council opts to maintain or reduce the size of its monthly asset purchase programme post March 2017 and also the target expected extended date of the programme will be high on investor’s agenda.

It is not yet clear to market participants what the outcome is going to be and this has created an element of uncertainty. European sovereign bonds, both of core and peripheral governments have been choppy over recent weeks, in part led by the volatility caused by their US counterparts but also as a result of the recent uptick in inflationary data.

It is too premature for the ECB to blow its trumpets and announce victory on its inflationary goals as it is still a far cry away from its target of two per cent but the market has positively interpreted the fact that progress has been made on this front and this has triggered a curve-wide sell off in European sovereigns.

Having said that, the ECB had already indicated that it will accordingly adjust its easing policy in an attempt to fulfil its inflation target.

In the US, a rate hike is an almost certainty. Trump’s victory has rattled the markets across all spectrums. FX, fixed income (investment grade and high yield) as well as equities across both sides of the Atlantic have reacted sharply to Trump’s victory last month and are still coming to terms with the ramifications of a Trump victory.

The dust is still settling, but in the meantime, the newly elect administration is drawing up and short-listing its candidates to take over key roles and is currently in the process of meeting US allies and has already indicated that it is trying to bridge gaps with those countries whose diplomatic ties with the US has turned sour over recent years.

So as we look forward to the upcoming round of Central Bank meetings this month and take stock of what we’ve had to contend with this year, we can safely say that apart from the macroeconomic data which continues to drive market sentiment and momentum, 2017 is expected to be characterised by some key elections in Europe, particularly in Germany and France as well as the ongoing Brexit negotiations and transition from the Obama to the Trump administration.

Exciting, or rather challenging, times ahead. What is clear is that in the Brexit referendum and US presidential elections, the media has had a worryingly high influence on the electorate and it is a known fact that a large portion of those who voted in either event have no clue what or who they voted for, and we expect that to be an ever present theme in 2017 aside from the underlying key themes of expectations of higher inflation and the possible end to the 30-year bond rally.

Disclaimer: This article was issued by Mark Vella, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.