Editors' Pick: Originally published Dec. 28.
In 2015, the global financial markets faced many uncertainties and challenges. Although most of the big events led to immediate volatility in markets, some may have a bigger impact in 2016.
Here are some of the many stories in 2015 that grabbed the attention of investors around the world.
The Federal Reserve, under the leadership of Chair Janet Yellen, this month raised its short-term interest rate target for the first time since June 2006. The 25-basis-point increase came after the central bank had kept the target close to zero for six years. The Fed's move was much anticipated, as an interest rate rise would indicate that policymakers thought the economy had stabilized in the wake of the financial crisis.
The Fed is expected to continue to increase rates gradually as the economy moves further away from the Great Recession. Investors should consider this as a healthy sign even though borrowing costs for firms and individuals will increase. The impact of the interest rate hike and that of subsequent ones will take some time to show their full effects on the economy.
China's devaluation of its currency, the yuan, in August surprised investors around the world. The move came amid signs that the world's second largest economy was slowing and suggested that Beijing was desperately trying to reaccelerate growth. The move caused other emerging nations to devalue their currencies and was followed by global stock market volatility.
The global importance of the Chinese economy and its currency, was underscored in November, when the International Monetary Fund approved the yuan's inclusion in the basket of currencies that make up what are called special drawing rights. In October 2016, the yuan will join this elite group, which currently is made up of the dollar, the pound, the yen and the euro.
In announcing its decision, the IMF recognized Beijing's economic and financial reforms. Inclusion in special drawing rights will make it more likely that the yuan will be used as a reserve currency by the world's central banks and is a symbol that China has made it into the big leagues of finance.
Unicorns, start-up companies valued at $1 billion or more, are not such a rare thing anymore. In fact, at the end of 2015, the cumulative value of all unicorns stands at $518 billion, according to CB Insights. Transportation giant Uber's valuation breached $50 billion, making it bigger than 80% of the companies in the S&P 500.
But past hype about unicorns appears to have faded somewhat, and the market for technology initial public offerings has cooled, according to this October article in The Wall Street Journal. As of Oct. 19, only 14% of IPOs in the U.S. were from tech companies, the article said.
Europe faced political and financial unrest this year. In January, the Charlie Hebdo attack caused world revulsion against global terrorism. Then, as the refugee crisis was growing, the deadly Paris attacks in November underscored the threat of radical Islamic terrorism on the continent and boosted the prospects of nationalist, right-wing political parties.
2015 kicked off with the possibility of Greece's departure from the eurozone, but the currency union managed to avoid a so-called Grexit. The fiscally strapped country successfully negotiated a third bailout, bringing the total cost of Greece's various bailouts to nearly 320 billion euros.
2016 will see shifts in global markets thanks to Fed's interest rate hike and future possible hikes. The year may also test the strength of unicorns that have thrived in a low-cost funding environment. China's uncertainty may keep many of its trade partners worried, and Europe will continue to try to buoy its challenged economy.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.