The divergence between financial conditions in the U.S. and Asia ex-Japan has got to extreme levels, according to the Bloomberg data.
As Bloomberg’s Ye Xie details, the tighter the conditions are, the harder it is for companies to raise capital, the higher the risk of a growth slowdown, which appears to be getting priced into US and Asia stocks…
Conditions in the U.S. are about one standard deviation more accommodative than normal, while Asia is tighter by a similar amount.
The euro-zone is about neutral. Bloomberg doesn’t have data for Latam, but it wouldn’t be a stretch to assume it’s a similar situation as in Asia, if not worse.
This is another way of saying that global growth is becoming less synchronized.
The question is, whether the U.S. pulls the EM up, or EM pulls it down.
One way or the other, the current divergence won’t last long.
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