12-22-2016, 11:55 AM
For instance, one of the things that can go wrong is the effect of a rising dollar on emerging markets, we wrote about that last week:
- The dollar has surged, and this doesn't look to be over yet.
- In a way, this is good as it spreads US reflation around the world via trade, where it is more needed like in the eurozone and Japan.
- However, one can have too much of a good thing.
- While the trade connection is largely benign, the financial spillover effects are anything but.
- A further dollar bull run could unleash a truly epic emerging market crisis compared to which the Asian crisis of the mid 1990s was child's play.
- For now, we suggest to enjoy the ride and buy Japanese shares as the biggest beneficiaries.
That's the dark side (which is not necessarily going to happen), here is an expert:
Risks may be rising across emerging markets, but there are still pockets of opportunity, Mark Mobius, executive chairman of Templeton Emerging Markets Group, said in a blog post. Emerging markets have been hit by hefty outflows as the U.S. dollar surged in the wake of Donald Trump's surprise election win and the U.S. Federal Reserve's move to hike interest rates for only the second time in a decade.