Many financial commentators say a currency war is on, as a multitude of nations outside the United States seek to devalue their currencies to boost exports.
But this doesn't have to be a problem for investors, says David Waddell, CEO of Memphis-based wealth management firm Waddell & Associates.
"The recent turbulence in the market stems from three competing central banks," he writes in
The Memphis Daily News. The European Central Bank and Bank of Japan are working to weaken their currencies, while the Federal Reserve is content to see the dollar rise, as it begins to tighten policy.
"The result of these competing priorities and uncoordinated action is higher levels of investor uncertainty and marketplace volatility," Waddell explains. "Expect more of this in the coming year, as central bank statements and body language direct currency, commodity, fixed income and equity reactions."
But fear not, he writes.
"This does not suggest a bad year for investors, but the heavy presence of central banks makes forecasting winners and losers more difficult."
So how should you invest?
"Best to be widely diversified, stay the course and watch the speculators hyperventilate," Waddell suggests.
"Think of global central banks as the pricing departments for their respective countries. With sluggish demand and inflation pestering global economies, pricing departments have to become more aggressive to lure shoppers. So don't be scared, but be aware. Currency war games will direct markets in 2015."
The big currency news this week was the Swiss National Bank's decision to abandon its three-year-old ceiling for the franc. Dennis Gartman, publisher of the Gartman letter, criticized the move as the worst central bank policy he's seen in four decades of watching markets.
"This really is a silly decision on their part, and it has inflicted enormous losses across the world to a great number of people," he tells
CNBC.
After the Swiss National Bank dropped the 1.20-franc floor that it had set for the euro, the common European currency plunged as much as 41 percent to 0.8517 franc.
"The sum of money that the Swiss central bank is going to lose is going to be in the tens of billions of dollars. The impact upon the Swiss stock market and the losses that are accruing to Swiss citizens . . . are going to be hard for the Swiss national bank officials to defend," Gartman notes.
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