By Tyler Durden
While so far the rout from the North Korea crisis has impacted global volatility first and foremost, with the VIX surging 50% (a rather pointless metric considering where the VIX was just days ago) on a modest drop in the S&P which earlier this week was making new all time highs, as massive short vol positions have been rapidly unwound, one trader believes the next place of impact is the sector which has so far emerged, so to say, largely unscathed from rising risk concerns: emerging markets, the clear outperformer so far in 2017.
In his latest overnight Macro View, Bloomberg’s Mark Cudmore writes that “Rightly or Wrongly, EM to Bear the Brunt of Selloff”, and considering the overnight plunge in Chinese stocks, which as discussed earlier just suffered their biggest drop of the year led by the commodity sector…
… he may be right.
His full note below.
Rightly or Wrongly, EM to Bear the Brunt of Selloff
During acute periods of risk-aversion, positioning dominates fundamentals. This is why some of the best structural investment stories can see the most painful corrections in the short-term.
Emerging-market assets have been the rampant outperformers of 2017. The macro fundamental arguments for …read more