Capital Market Line: 4Q15

The market is worried about China’s inability to continue driving global growth. In contrast, we see developed market (DM) economies poised to accelerate after having completed a period of deleveraging.

Most emerging market (EM) economies (including China) will continue to slow. Looking back, EM growth was amplified by rapid credit expansion, which now looks poised to contract. We see a shift away from EM-led growth, with DM picking up the baton. Our Capital Market Line (CML) has repriced and now once again has a normal slope. Unusually wide dispersion remains and volatility has reset higher driven by the shifting dynamic favoring DM.

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