Just as it seemed that expectations were acquiring an optimistic slant, the markets tumbled worldwide in the past couple of days!
In the US there is the looming change in the Fed´s Commander-in Chief and questions about how the taper will progress.
In the UK, Mark Carney´s “guidance threshold” reached the “way station” much sooner than expected. And to some:
“The guidance framework hasn´t just failed to offer the clarity the MPC was seeking, but has created unnecessary confusion and volatility in rate expectations”
In the Eurozone the ECB is being urged to act on inflation. Not because it risks going up but because it is too low! Unfortunately the ECB does not appear to be too concerned. (Nor does the Fed for that matter).
All this certainly places strong headwinds in Japan´s recovery program.
And in emerging markets, even if you don´t consider Argentina, the rout in stock, foreign exchange and bond markets continued, as there is mounting concern over how those markets will cope with the withdrawal of global stimulus.
But the feed-back effects on developed country markets of eventually slower growth in emerging markets, and how that could affect ‘tapering’, should not be forgotten.
It could be that the world economy is getting into a negative loop!