Markets all over the world seem to be facing a variety of economic downfalls of different proportions. Just last week, the Argentine peso declined 13%. Other currencies such as the lira from Turkey, the rupee from India, the real from Brazil, and the rand from South Africa have declined as well. Emerging markets have been under pressure since. London’s FTSE 100 fell 1.7%, dropping down to 6,550 points by the end of the day yesterday. The Vodafone network lost 3.8%, after American competitor AT&T stated they have no imminent plan to launch a takeover of the network. Emerging markets lost as well, such as India's Sensex which fell 2%, and Hong Kong's Hang Seng Index which also lost 2%.
Many see these market downfalls as another example of the emerging market crisis that occurred in the 1990s. Chairman/CEO of Marketfield Asset Management Michael Shaoul sees this as “the most severe period of under-performance by emerging markets since 1998,” but there are also people who think otherwise. Wasif Latif, who manages $57 billion for USAA Investments, believes the opposite. He thinks “[t]he sell-off we’re seeing [worldwide] is not tremendous compared to history [such as the last crisis in 1997-1998.]” What do you think? Does this seem like a short term problem, or something like the market crisis of the late 90's or worse? What do you think governments should do to fix these dropping markets?
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2 comments:
To answer your question about government involvement, I think that central banks should be scheming up ways to taper stimulus in a way that doesn't freak investors out. According to the article, these emerging markets are looking less attractive because of tightening money supply, but central banks can't keep rates low forever (even though investors seem to want that). Markets are becoming too dependent on cheap money; sooner or later you have to take the training wheels off, and if the market corrects, so be it. Of course the Fed is planning to taper, everyone knows that it'll come some day, but when they hear talk of scaled back stimulus they freak out. I can't speak for other markets, but regarding the US I think that gradual tapering makes sense: the economy has recovered strongly, equity markets are at somewhat (but not really) reasonable valuations, unemployment is on its way down below the 6.5% threshold. So really I don't think governments should be doing anything to fix dropping markets, rather they should be thinking of ways to stop fixing markets. The S&P can afford a 200 or so point correction, especially considering the index probably got to ~1800 courtesy of the Fed.
Things like this always confuse me, because I feel like money just disappears. I'm aware that many nations are in debt right now, but you'd think that all that money we all owe each other, someone would be doing well...
But no, everyone seems to be in debt and struggling financially and it confuses me as to where all this money goes if we're all in debt. It seems like it should be some kind of circle, we borrow money, we owe you money, we pay you back a little, you own us...I'm not sure. Guess we all just suck.
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