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21 Jun 2013
Flash: Implications of Fed tapering widespread – Goldman Sachs
FXstreet.com (New York) - According to the Economics Research Team at Goldman Sachs, “Growing concerns about the implications of Fed tapering are understandable given the low level of bond yields and the sharp rise in equity prices over the past year.”
Fears are centered around the sustainability of growth and equity prices in the absence of QE as well as on assets that are particularly vulnerable to a withdrawal of liquidity. EMs are of particular concern given the sharp narrowing of bond spreads in many cases and the growth of imbalances in some economies.
Europe remains exposed
While Europe may no longer be seen as the epicenter of global risks and its economy appears close to an inflection point, we view its equity markets as vulnerable to EM weakness given that around 25% of sales exposure for the SXXP is to EM and Asia. Technology, basic resources, food and beverages, household goods and services are amongst the most exposed.
Fears are centered around the sustainability of growth and equity prices in the absence of QE as well as on assets that are particularly vulnerable to a withdrawal of liquidity. EMs are of particular concern given the sharp narrowing of bond spreads in many cases and the growth of imbalances in some economies.
Europe remains exposed
While Europe may no longer be seen as the epicenter of global risks and its economy appears close to an inflection point, we view its equity markets as vulnerable to EM weakness given that around 25% of sales exposure for the SXXP is to EM and Asia. Technology, basic resources, food and beverages, household goods and services are amongst the most exposed.