“This is just like the last 2 years.”
“Leave it to Europe to mess up our markets again.”
“If Europe would just get its act together, global markets are ready to rip.”
This type of commentary has been ubiquitous the past 2 months. But the evidence says that this year is not like 2010 or 2011. Though I’ve harped on it before, today’s chart, from the shortsideoflong blog, is a great illustration of how emerging markets are acting differently than the past 2 years:
Notice the weakness of the blue line relative to 2010 or 2011. The emerging markets surprise index has clearly been much weaker this year, and is a big factor in our overall bearish stance on U.S. multinationals with significant international sales.
While this year feels similar to 2010 and 2011, the outlook from my seat is much worse than the past 2 years given the global weakness. Even though policymakers would like to be immediate saviors, it is much harder to intervene effectively when it’s a potential global recession rather than targeted weakness. No matter the result from the European summit this week, stock market weakness is likely to persist.