Wednesday, November 4, 2015

The Disconnect That Signaled The August Market Chaos Has Reappeared ...........

The Disconnect That Signaled The August Market Chaos Has Reappeared

Back in August ahead of the chaos that sent markets in the US down 10% in just a few days, emerging markets ultimately proved to be "the tell." Starting in early August, emerging markets began to fall, sharply, with the S&P 500 eventually following lower.  

Developed and emerging markets, however, have moved in lockstep as the world has seen a widespread rebound in the last two months. But now, emerging markets are starting to look soft again.  

Last week, the Federal Reserve surprised markets by making it pretty clear that they're thinking about raising rates in December, a move that would be negative for emerging markets.

Risk assets are averse to the combination of global weakness and US rate hikes, as the latter compounds the former through the dollar/commodities/oil and [emerging markets.

The question, of course, is whether the decline in emerging markets will again foretell a decline US stocks.


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