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The 2016 economic chessboard is set, and the game may prove to be fascinating. What follows is a description of the major pieces, from pawns to queens, their positioning on the board and what moves players may make in 2016.China on the RopesAccording to the Wall Street Journal, China’s official GDP growth target for 2016 is 6.5% compared to 7% for 2015 and 7.5% for 2014. (In 2011 China had a year-over-year GDP growth rate of close to 10%.) Recently, China devalued its currency to boost exports. This move is seen as a "last-ditch", economic engineering method. Trading in China halted twice this month as sell-offs triggered the stock market’s 7% decline circuit breaker. Reverberations were felt around the globe; Japan’s Nikkei Stock Average, Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng Index each lost more than 2%. Ultimately, the Chinese economy is the portrait of a sloth meandering along, and the country's deceleration will continue to send shockwaves throughout global markets in 2016.

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The Fed is Just Getting StartedPolicy makers believe that the Fed will raise its target rate range by a full point in 2016 to 1.25% to 1.5%. Traders, on the other hand, believe that the Fed will only raise rates by half a point. Much of this prognostication rests on the fact that inflation is not yet at the Fed’s target of 2%, and the prices of commodities such as oil show no signs of rising this year.The Chess Game of Oil PricesIn 2015, oil was down by more than 30% to $36.60 a barrel. Both Saudi Arabia and Russia have refused to cut oil production deciding to generate short-term cash flow instead of bolstering overall oil prices. With continued production levels, unless the U.S. cuts production or OPEC decides to ratchet down its production, oil prices will hold at lows and perhaps even continue to drop. This does not bode well for the energy sector, but it is a promising sign for consumers at the pump and every other business that uses oil as a chief input. (Think specialty chemical companies such as Valspar (VAL) and PPG (PPG).

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WagesThe U.S. jobs and wages’ picture is relatively rosy with the unemployment rate at 5% and recent year-over-year wage increases of around 2%. Large employers such as McDonald’s and Wal-Mart will continue to raise wages this year, and 14 states across the U.S. have recently decided to instate their own minimum wage hike, creating an average increase from $8.50 to $9 an hour in the states affected. Jobs and wages should continue to be a bright point in economic data this year.Missing, Reward Offered if Found - InflationInflation has been a festering thorn in the Fed’s side as it has steadfastly remained below its 2% target rate. The Fed seeks to maintain this level so as not to create economic disturbances in either direction, deflation or inflation-wise. The current sub-par inflation levels are partly due to bottom-of-the-barrel oil prices and partly due to a strong U.S. dollar. (A stronger dollar diminishes exports as foreign countries turn away from pricier U.S. goods.) Lower exports mean less demand that equates to lower prices. Lower prices equate to lower revenues, which equates to lower profits that equate to lower wages. Lower wages equates to lower consumer purchasing that equates to lower revenues, and the cycle goes on-and-on. As noted previously, though, wages have risen approximately 2% year-over-year in the U.S. and it is expected that inflation will eventually rise along with it. (Higher wages equates to higher purchasing which equates to higher prices and thus inflation, theoretically.)If inflation does not make an appearance, though, (at this point it might as well be pictured on the back of milk cartons as it has remained below the 2% target for three-and-a-half years now) the Fed will be pressured to hold off on further rate increases in 2016.

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The Bottom LineThe set-up of the 2016 macro-economic chess board is very interesting indeed and contains many nuances that will play out over the year. How they will play out is anyone’s guess, and I forgot the tea leaves today, but I will try: China is a fan of economic engineering that merely serves as an artificial levee that will suppress economic forces until one day they go boom. OPEC members and Russia are highly stubborn oil producers that will continue to Produce-Baby-Produce until high volume production cash flow diminishes and their economies suffer. The Fed has just cracked its knuckles on this whole raising rates thing, and as soon as inflation rears its beautiful-ugly-profit-inducing-head, the Fed will raise rates again this year.Until then, I will attempt to move things along: MISSING! HAVE YOU SEEN THIS INFLATION? (Inflation) REWARD OFFERED IF FOUND. Call 1-800-THE-FED.