End of Year Drama in Financial Markets: The Global Macro Picture in a Few Charts

In the face of global economic weakness, the central banks of Europe and Japan have engaged in vigorous programs of monetary easing, while the U.S. central bank has cut back its program of quantitative easing. That has been bullish for the U.S. dollar, as the chart of UUP depicts:

A number of emerging economies have currencies tied to the U.S. dollar, so that the dollar rise has created tighter financial conditions for them, even as those global economic conditions have weakened. That has not been bullish for the relative performance of emerging market stocks, as the chart of EEM vs. SPY depicts:

With that global economic weakness and the tightening of economic conditions, commodity demand from China and related emerging economies has declined precipitously, as the chart of DBC depicts:

With the decline most notably in oil prices, fears of default among energy companies issuing high yield bonds have led to a sharp decline in the prices of high yield bond funds, as the chart of HYG depicts:

This past week, the Federal Reserve announced an interest rate hike and a path of future rate hikes.

Since that time, the U.S. dollar has risen; commodity prices have fallen; stocks have fallen; and high yield bond prices have fallen. In short, the dynamics driving global macro markets have intensified and that is creating year-end drama in financial markets. It also carries important implications for 2016, as emerging markets are going to need a large depreciation in their currencies to kickstart financial conditions.
.

Comments

Women and children overboard

It's the Catch-22 of clinical trials: to protect pregnant women and children from the risks of untested drugs....we don't test drugs adequately for them. In the last few decades , we've been more concerned about the harms of research than of inadequately tested treatments for everyone, in fact. But for "vulnerable populations," like pregnant women and children, the default was to exclude them. And just in case any women might be, or might become, pregnant, it was often easier just to exclude us all from trials. It got so bad, that by the late 1990s, the FDA realized regulations and more for pregnant women - and women generally - had to change. The NIH (National Institutes of Health) took action too. And so few drugs had enough safety and efficacy information for children that, even in official circles, children were being called "therapeutic orphans." Action began on that, too. There is still a long way to go. But this month there was a sign that ...

Benefits Of Healthy eating Turmeric every day for the body

One teaspoon of turmeric a day to prevent inflammation, accumulation of toxins, pain, and the outbreak of cancer. Yes, turmeric has been known since 2.5 centuries ago in India, as a plant anti-inflammatory / inflammatory, anti-bacterial, and also have a good detox properties, now proven to prevent Alzheimer's disease and cancer. Turmeric prevents inflammation: For people who

Austerity-A Fancy Word for Destitute.

The reason for this post is not for the folks who have been caught in the first wave of personal economic hard reality, but the next wave. Regardless of the optimism espoused by grinning leaders and sycophant press, we are entering the final stage of global economic collapse. It began in 2008 and was forestalled for five years with fudge putty, but the weight of global indebtedness cannot be propped any longer and the final crunch is imminent. Austerity measures herald the final throes. Indications of coming austerity. Austerity measures are the final last ditch effort, futile or not! Back in the day many of us old-timers went through periods of "hard-times". In retrospect I realize there is no comparison to yesteryear hard times and today's version. Back then, expectations were never very high for the working class, there were no sophisticated systems or conveniences anyway. In fact the difference between being "set" or not was about having treats or not. Si...

Humor4u

Search This Blog