MyStratWeekly – September 19th 2022

Topic of the week: King Dollar spells trouble for Emerging Markets

• The broad effective exchange rate of the dollar remained relatively stable against emerging currencies;
• However, in the current context of high food and energy prices, the strong dollar is putting pressure on heavily indebted countries to choose between feeding themselves and paying off their debts;
• Bilateral support from the IMF and China alleviates default concerns;
• This is a “game changer” for the external sovereign asset class.

Market review: The infernal cycle

• US inflation sparked expectations of further tightening;
• Sharp drawdown in US equities after the CPI release;
• US yield curve inverts further;
• Credit trying to find equilibrium.

Stéphane Déo's podcast

• Should pensions still be reformed?
• Is the risk of economic collapse significant?

Chart of the week

For two decades, the Treasuries were a hedge against falling stocks, that is no longer the case today.
The Fed’s "hawkish" comments increased volatility between asset classes. The change in the inflation regime is also usually associated with a reversal of correlation matrix.