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Index IDEA: As good as it gets? EM feels pinch as US market conditions tighten

Tightening US financial market conditions are putting the synchronized global growth narrative to the test, with emerging markets being the first casualty, says the latest Equity Market Drivers Report from global index provider FTSE Russell.

According to the report, released earlier this week, FTSE Russell’s US FCI (Financial Conditions Indicator), a broad-based measure of a variety of market conditions such as interest rate expectations, real money supply, balance sheets and bond spreads, has edged close to 4 for the first time since early 2007. And with the surging US dollar and tightening US dollar liquidity, emerging markets appear to be early casualties.

Philip Lawlor – managing director, Global Market Research, FTSE Russell:

“After a couple of years of synchronized growth and increased risk appetite, tightening US financial conditions suggest we are close to the end of this phase of robust global growth. The slippage in leading indicators, flattening US yield curve, commodity selloff and the fading trend in forward-looking GDP forecasts all suggest that the global cycle is peaking: investors will be tempted to ask if this is as good as it gets. Risk appetite and dollar-dependent emerging markets are the first casualties of tightening US-dollar liquidity, and emerging-market sentiment remains extremely negative.”

Source: FTSE Russell and Thomson Reuters. Data as of August 10, 2018. Past performance is no guarantee of future results. Please see the end of this document for important legal disclosures.

For more information on global equity indexes from FTSE Russell, go to the FTSE Russell website.

 

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