A close look at the Citibank macroeconomic surprise indices shows some surprising numbers. The US has seen a steep decline and is also falling much faster than what is going on in the EU or emerging markets. The absolute decline has been quite large. Emerging market economic information has not surprised the market as much as the slower growth in US. Given the fall in EM stocks, one would have expected the big decline coming in the Em country data. Could it be that the EM equities are overreacting to the Fed taper program?
This decline has an impact on markets. When the surprise index moves from positive to negative there will be a stock correction. We have already seen a correction in January but the surprise trend is still pointed downward. It is a clear warning sign to be careful in risky markets.
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