There's been a lot of talk about the Fed hiking rates soon, and this should be inevitable within the next few months. In the longer term (let's talk about the next 2-5 years), the rates are probably going to keep climbing, and at some point, the economy begins to slow down, stocks will decline, and investing in bonds becomes attractive.
All of the above is from the viewpoint of a person living in the USA. However, Europe is in a different situation economically, and it looks like there isn't going to be a rate hike any time soon by the ECB.
My question is, since financial markets are so integrated these days, what is going to happen to the European economy and the stock market in the next 2-5 years, if the base rate stays close to zero to stimulate growth, while at the same time in the U.S., the Fed raises the rate to somewhere near 5 percent?
In other words, how does the U.S. monetary policy affect European consumers and investors? Especially if the two are in different phases in their policy cycles (will the cycles eventually be synchronized?).