Sunday, January 12, 2014

Emerging markets not ready to decouple from US, Euro Zone, Japan and UK

After the global recession of 2007-2009, growth has been sluggish in the U.S., the euro area, the U.K., Japan and other developed lands. Meanwhile, the economies of China, South Korea and many other developing countries revived and grew much more rapidly.

This convinced many equity investors that the real action was in emerging markets, where equities rose much more than in developed countries from March 2009 until mid-2011. Once again, investors forgot that those economies are all driven by exports that are bought by developed countries, principally the U.S. and Europe. So if mature economies are growing slowly, rapid expansions in developing countries are unsustainable.