Not exact matches
Emerging
markets have generally improving fundamentals, but could be vulnerable to sudden
tightening of global
financial conditions.
Right now with earnings growth very strong and the bond
market already reflecting a fair amount of Fed
tightening (pricing in 5 rate hikes over the coming 2 years), my sense is that the stock
market is in OK shape to withstand some
tightening of
financial conditions and not unravel in the process.
Yet a simmering US - China trade dispute has roiled
markets in recent weeks and
tightened financial conditions, which could argue for going slower.
The
market - led
tightening of
financial conditions generated serious tremors in emerging
market economies.
Caveats: If
markets and investors overreact,
financial conditions could
tighten too much and choke economic growth.
Since the Fed started hiking rates up,
markets and
financial conditions have not
tightened.
Yet a simmering U.S. - China trade dispute has roiled
markets in recent weeks and
tightened financial conditions, which could argue for going slower.
A sudden
tightening of
financial conditions could lead to
market corrections, unsustainable debt, and capital flow reversals.»
Higher interest rates, falling stock prices and a weak dollar represent a
tightening of
financial conditions — which have been very easy for a long time, a key source of fuel for the long bull
market.
Markets have been
conditioned to believe the Federal Reserve is sensitive to sudden
tightening of
financial conditions, but this might well now be a mistake.
While the federal funds target rate was stable, credit
markets had been
tightening financial conditions since the beginning of that year.
but the
tightening of
financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor
market.
Jurrien continued, «Having said that, I expect the Fed to
tighten more and faster than the
market is currently pricing in, which could send real rates higher and
tighten financial conditions.
When
conditions are «too easy», one expects the
financial markets to
tighten and stocks to fall.
In addition, the announcement of an end date could induce
market participants to frontload possible price adjustments, which might lead to an undue
tightening in
financial conditions
Emerging
markets have generally improving fundamentals, but could be vulnerable to sudden
tightening of global
financial conditions.