We wrote earlier this year on the downsides of synchronised global growth. We wrote that when global synchronised growth begins to end the U.S. dollar strengthens, investors run away from emerging markets, interest rates continue to rise to tame inflation and bad debt becomes an issue. All of this is happening now, first the US Dollar, here is the 1-year performance of the U.S. Dollar mapped,
Notes: 1. We have excluded the performance of Liberia, South Sudan, Uzbekistan, Sudan, Turkey, Angola and Venezuela on the map because they are major outliers. They are included in the data set below. 2. Currency price data updated 12-August-2018
Now compare that to the performance as on March 31, 2018. (Read: Not an April Fools’ Day joke – this really is how the US Dollar has performed against each currency of the world over the past one year)
Notes: 1. We have excluded the performance of Liberia, South Sudan, Uzbekistan, Sudan and Venezuela on the map because they are major outliers. 2. Currency price data updated 31-March-2018
Here is the table for USD performance as of August 12, 2018 and March 31, 2018:
So basically, emerging markets are taking a beating. Not just currencies for those emerging markets but stock markets and bond markets too.
Interest rates are rising (we will compare interest rates to a few months ago in a few days) to tame inflation.
And bad debt is becoming a problem. Not just corporate debt (especially in China, South America and Africa) but government debt is becoming a problem too especially in Italy and Brazil.
Is this the end of global synchronized growth for the current growth cycle? Feels like it