All hinges on the FED tapering. Good news in US is bad news for emerging markets as it will give impetus to tapering earlier.
I voted Jan. 2014 and think the most likely start to tapering will occur either in Jan. or in March 2014.
We are already seeing this nervousness affecting or market and other (mainly) emerging markets.
Goldman’s top 10 themes for 2014• ….but EM differentiation to continue
Countries with high current account deficits, high inflation and weak institutions were punished more heavily than those with stronger current accounts in 2013′s sell off in emerging markets, and the level of differentiation is likely to be even greater in 2014. Goldman Sachs expects a greater separation between countries with credible tightening policies, such as Brazil and India, and those where imbalances are allowed to grow, such as Turkey.
The note said: “There is also likely to be increased focus on the small number of countries showing more classic EM-style problems. The macro environment in Venezuela is deteriorating rapidly and we expect a large devaluation and further credit pressure. Argentina’s macro backdrop is also unfriendly. And we continue to think that Ukraine will choose to devalue and seek external support in the coming months.”
• Commodity downside risks grow
Goldman Sachs expects 15% plus declines in prices in gold, copper, iron ore and soybeans. Energy prices, while more stable, also face downside risk which is growing over time.The note said: “These pressures are also likely to reinforce some of the other core themes discussed here – loosening what has been a key constraint on DM and global growth in recent years, keeping inflation subdued and preventing long rates from rising much above forwards.”
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