The Great Divergence in monetary policy
Yields in the EU jumped up and the Euro had one of the biggest positive days since its inception on the announcement only to see ECB president Draghi suggest that there is "no limit" to what the ECB will do to help the economy. The high volume of activity coupled with the price moves tells us that that many are trading this differential closely. Some of the most liquid markets in the world may still face cascades when these crowded trades are surprised.
Getting this trade right is a global macro requirement for 2016.
China, financial statecraft, and currency markets
Currency traders will have to have an opinion on China - from growth, to PBOC policy, to currency moves. If you are involved with currencies, you will not be bale to avoid having a China opinion if you do not trade the currency. Don't worry, that effort will not be useless. Most currency traders will be trading Renminbi soon enough.
Just-in-time commodity markets
The surprise over the last few years, especially for the energy markets, is that private market supply is more sensitive to price than what we may have thought. This is especially the case with bringing on new production. We have also found that supply that is not sensitive to market prices because marginal costs are low will destroy the rest of the market. Economics 101 told us that, but the markets have been surprised by how quickly producers can reduce their marginal costs over the last few years. In the case of low cost non-private producers in Middle East, low costs have made them willing to ride the price declines with production increases.
The shale oil boom has been about how oil men were able to take bank financing, punch holes in the ground and get oil and natural gas on-stream quickly. The decline in price is about the battle of those who can generate supply quickly against those who want market share and don't care about price in the short-run, the Saudi Arabia. OPEC is broken because no one can impose discipline on producers.
For the rest of the commodity markets, traders have been surprised how quickly producers can adapt to changing market conditions. We have also seen the elimination of crop seasons. Corn and soybeans are both Northern and Southern hemisphere crops. Coffee is grown around the world. Sugar comes varied sources. Wheat production is grown in various crop centers. The high dollar has made it possible for other countries to sustain production. Technology and storage innovation have allowed producers to continue to generate new supply in the face of falling prices. What we have seen in manufacturing we are now seeing in commodities, an adaptable just-in-time production world.
Be ready for surprises from adaptation in a low commodity price environment.