Correlation is a term you don't hear tossed about much today, at least not directly. There is also the Wall Street term negative correlation which is an oblique way of saying diversification.
The move toward globalization is a move away from negative correlation. In short, we're all in the same rub a dub tub. One writer discussing the possibility of a global recovery noted."It's been a rough year for emerging markets across the hoard." Yes, indeed, it has and if one were a good contrarian and felt the global economy was really on the mend, one might dump money there, value trap or otherwise.
A day before the Fed flaps it's huge lips, up or down or steady as she goes, much of the concern is about the global impact of what's been one of the MSM meme, divergence, for months.The world biggest economy hiking rates while other major players take a different direction.
That's one of the major fears surrounding Fed action. That's globalization. That's correlation.
Like that old Vegas saying, "What happens here stays here," no longer applies. It's also what a growing number of EU members are beginning to realize once they got hoodwinked into forfeiting their currencies, customs and cultures to join a monetary union.
The Unites States is linked more than ever before to major players around the world. China's slowdown has hurt other emerging markets. Japan is barely growing. Europe is struggling with low economic growth too. It's been a rough year for emerging markets across the board.
To varying degrees, all that weighs on the U.S. economy and the Fed. The concern is that the Fed's rate hike can cause a boomerang effect: (1) the Fed raises rates, (2) that hurts other economies even more, and then (3) economic woes in developing countries eventually hurt U.S. trade and economic growth.
The U.S. manufacturing sector has already shrunk as a result of the weak global economy and strong U.S. dollar.
China's efforts, back door or otherwise, to un-peg the yuan from the dollar is about correlation. So the financial globe awaits tomorrow. Keep in mind that correlation is not always causative. The Fed hikes rates and the financial globe collapses. But perception is.
And that's why MSM memes, particularly those they work especially hard, are always dangerous. An example one might want to consider is the MSM and its characterization of Trump.
China's efforts, back door or otherwise, to un-peg the yuan from the dollar is about correlation. So the financial globe awaits tomorrow. Keep in mind that correlation is not always causative. The Fed hikes rates and the financial globe collapses. But perception is.
And that's why MSM memes, particularly those they work especially hard, are always dangerous. An example one might want to consider is the MSM and its characterization of Trump.
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