Mean reversion continues for emerging markets

From ominous bubble valuations of 2007, emerging market stocks and economies plunged along with other developed markets in the 2008 downturn, once again revealing ‘decoupling’ proponents as dangerous salespeople. On epic stimulus injections from central banks and governments in 2009, emerging markets recovered somewhat with global manufacturing into 2010 and have largely fallen or flat lined since. With the end of the Fed’s QE program yesterday, a continued exodus of “hot money” flows (ie., money that was there for a trade or speculation rather than long term investment) out of emerging markets and currencies is likely.

Enormous multinational financial conglomerates had already made global markets highly integrated before the 2008 crisis, coordinated central bank policies and theories since then, have only made correlations higher. Here is a direct video link.

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