Remember when we said that for emerging markets to have a sustainable rally, China had to be leading the charge. Well it is — and emerging markets are not following.
Shanghai skyline at night
Why? Or is it playing in the weeds?
China is now 20.3% higher off the lows set in early December.
In my view the greatest correlations in macro are as follows:
Rates are higher in defensive markets like the U.S. and Germany, and lower in the European Union’s periphery such as Spain and Italy
A massive weakening of the yen — with more to go — equals a major asset allocation shift; i.e. China is well bid.
