As the Fed flooded the US economy with cash, some of it ended up in emerging markets where risks and returns are higher than here. With US rates now rising, financial markets in those countries are being badly hit. Simultaneously and unrelated to the exodus of hot-money described above, some of these same economies like Brazil and Turkey are experiencing major social unrest that is negatively impacting all emerging markets.
Tag Archives: financial markets
Vicious Volatility
On days like today when stocks, bonds, precious metals, commodities and emerging markets all fall, portfolio diversification, doesn’t help. Remember that. Separately, financial markets have wiped out all of May and June’s gains not because QE3 will end, but because participants are unconvinced that the economy can withstand higher interest rates without slowing. And that will hurt household spending and ultimately corporate earnings. I’m diversifying into booze.