Emerging Money Daily Audio Call October 6 – Global equities can now experiencing the duality of hope and fear now that rates are indeed moving higher again.
The hope is we are truly normalizing in terms of policy because the global economy and can stand and grow on its own. The fear is that the Fed got all they needed today to take the next step in their policy unwind and rate hike progression. The reality is that the short end of the curve is at 9y highs in terms of yields, and Germany and even Japan are at key resistance.
Today’s NFP showed wages that have hit 9 yr. highs and participation rates that also are peaking, even if the hurricanes decimated the schedules of job seekers and workers. Overall it was an extraordinary week of data in the US (Auto Sales, ISM Services and Manufacturing, Wages) and this should be bullish for equities if they haven’t already priced this in. Remember that structurally, equity valuations are very different at a 2.90% 10yr discount rate than they are at a 2% discount rate.
EM equities pause but we like the fiscal adjustment that have been made and fund flows that reflect a continuing character change. Today we frame our valuation argument for continued outperformance.
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