There has been a lot of talk about the synchronized global growth upswing. But lately, disconnects have started to appear and monetary policies have become increasingly unsynchronized. Volatility has returned to markets, and the world appears less distinguishable by risk; so-called “safe haven” assets and local currency emerging market (EM) debt have moved in uncharacteristic ways.
Developed markets (DMs) are focused on normalizing rates upward as most EMs are taking advantage of lower inflation to cut rates. Recently, DM leading indicators have turned downward – and with monetary policy affecting global economic growth with a lag of 12-18 months, EMs might have another growth spurt ahead of them.
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