Emerging markets are being blamed on just about all hiccups and bad surprises currently befalling the global economy and financial markets. However, this is slightly unwarranted and, in any case, not consistent with the evidence.  Out of the 9 equity markets up on the month, Indonesia, Hungary, Peru, the Philippines and the Czech Republic are among them.

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This would seem to fly rather strongly in the face of the notion that Turkey, Argentina and Ukraine are to blame for the recent sell – off in global equities. Meanwhile, as we have pointed out to clients in the past few months stretched stock-to-bond ratios and cyclically high macroeconomic surprise indices have been suggesting that equity markets could be in for a rough patch.

280114_US macroeconomic surprise index 1Consider for example that the US macroeconomic surprise index and the G10 aggregate have been in the top based on positive deviations from their mean in recent months.

280114_macroeconomic surprise index 2The potential for EM contagion is certainly present right now, but there are plenty of homegrown reasons in the developed world to argue for the recent sell-off.