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Emerging markets, lower growth, your trades

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Published on Jan 14, 2014

http://goo.gl/c44zXj

Emerging markets are actively seeking lower growth and that's going to impact developed economies in 2014 hard and you should be prepared for the fallout. So says Steen Jakobsen, Saxo Bank's Chief Investment Officer. He says so many of them are running current account deficits and the only way they can really counter that is to make imports more expensive. That means a weaker currency. A weaker currency, he maintains, means less demand in the economy. And that will hurt exporters such as the US and Germany.

Steen says this isn't necessarily a bad thing; it's a natural evolution as economies rebalance. However, it's going to be a huge challenge for all of us in terms of growth and earnings' potential over the next eighteen months.

Steen suggests that we're not going to see a true recovery until 2015. In the meantime, he says you should consider reducing your equity exposure and perhaps be heavier in core European and US bonds. Ultimately, he maintains the big game here is to use whatever sell-off we have in equities to re-establish your long positions and then play the "true recovery" which is still a long way off.

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