- The dismal performance of emerging market equities during the past three years (a total of -20%) suggests that a rebound may lie around the corner.
- Yet, country-specific factors aside, three key global factors argue otherwise: 1) insufficiently attractive EM valuations, 2) the structural deterioration in EM balance sheets and the resulting vulnerability to 3) tightening global monetary conditions.
- The latter in particular far surpasses the small 25bps hike the Fed delivered in December 2015. The end of QE3 is estimated to be equivalent to a 300bps tightening, while the sharp decline in foreign holdings of US Treasury securities further adds to a vicious cycle of tightening monetary conditions.
- In the short term, rising commodity prices provide non-trivial support to EM assets, but the persistent structural economic weakness and the risk of a shock to market expectations of Fed hikes implies that investors should fade rallies, rather than buy into them.
- There is life in the Philips curve after all! research.chicagobooth.edu/-/media/resear… research.chicagobooth.edu/-/media/resear… 11 months ago
- Finally some sense on the matter! bloomberg.com/opinion/articl… bloomberg.com/opinion/articl… 11 months ago
- Alan Krueger's infamous Rock 'n Roll Speech: obamawhitehouse.archives.gov/blog/2013/06/1… obamawhitehouse.archives.gov/blog/2013/06/1… 1 year ago