"The question now is whether the asset class faces seven lean years after (roughly) seven fat ones. Or whether the recovery will be sooner and sharper than it has tended to be in past cycles".
"The MSCI emerging markets equity index is down 13% over the past year in dollar terms–with the leading BRIC countries, Brazil, Russia, India and China, down 17%. An index composed of the seven leading industrialized countries’ shares is up 16% over the same period.
That’s a dramatic reversal of relative performance.
Emerging markets equities were up 270% in the decade to 2013–notwithstanding they had fallen 20% from October 2007 peak. G-7 equities were up a mere 57% over the same period''.
''Maybe it should come as no surprise that just as developed economies seem to be emerging from the worst of the financial crisis’ after-effects, emerging economies are stuttering. The current malaise started last spring when the Federal Reserve started dropping heavy hints about winding down its stimulus effort. This makes sense. A flood of developed economy central bank liquidity flowed into emerging markets following the financial crisis, seeking out a dribble of positive yield. But with the outlook for developed economies improving, some of that started to reverse".
"There are plenty of problems specific to some of the hardest hit emerging markets, not least political turbulence in Turkey and Thailand, inflation in Brazil and India, and China’s increasingly precarious financial system".
''Historically, emerging market performance has tended to move in five- to ten-year cycles, usually driven by extended credit booms followed by deep busts during which time default, devaluation and inflation have crushed investor returns''.
The author of this article is saying that all EM are on the same bag something that I deeply disagree, because it is clearly a mistake
''There are plenty of reasons, however, to believe that things haven’t changed that much. There have been huge credit booms in Turkey, Brazil and especially China. There has undoubtedly been vast misallocation of capital which will have to be recognized one way or another. If defaults don’t follow, government bailouts will. Devaluation and low growth are highly likely as economies adjust. A flow of bad news will drive investors away and keep them there until they’ve sufficiently forgotten the pain and are once again attracted by the potential".
If it not where for China's purchases of treasuries, the US economy would still be in a very,very deep recession.
Talking about misallocation of resources,has the author forgot of the Dot.com bubble?,the commodities bubble?,and the real state bubble? of the past 15 or 20 years in the US Markets.
If it not where for China's purchases of treasuries, the US economy would still be in a very,very deep recession.
Talking about misallocation of resources,has the author forgot of the Dot.com bubble?,the commodities bubble?,and the real state bubble? of the past 15 or 20 years in the US Markets.
Source: WSJ Falling Like A Brick by Allen Mattich
