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One Bank Takes A Wrecking Ball To ‘Global Liquidity Shortage’ Narrative
If you ask around about the proximate cause for the turmoil in emerging market assets in 2018, you'll generally come away believing that while idiosyncratic flareups (e.g., Turkey and Argentina) have certainly played a role in souring sentiment, the controlling factor is the Fed's tightening cycle.
But you could conceivably argue that because developed market monetary policy is still highly accommodative and, more important, highly predictable, emerging market assets as a group have overreacted
too short term. his view is kind of ‘it works until it doesnt’ that other 20% of the time when credit spread DONT tighten…as that has already occurred and were headed inthe other direction: credit deteriorating….but since its ‘not too bad’ yet, lets just ignore and figure if sp500 is up, it’ll all work out.