KEY TAKEAWAYS
- Falling equity markets and bond yields signal insufficient aggregate demand; the world needs a new growth engine to borrow and spend.
- Developed markets have outperformed emerging markets for some time; recent market panic continues this theme.
- Low US inflation and increasing deflation risks from abroad give the Fed few reasons to rush rate hikes.
- China has engineered a weaker currency, but devaluations are not a new game.
- The trend of wider credit spreads continues, creating value; profitability is critical at this stage.
- As valuations adjust, low global interest rates and central bank easing should reinvigorate risk-taking.
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