The U.S. durable goods reading gave no form of respite. The release highlighted the drag that higher payroll taxes have had on the U.S. economy. In spite of the negative tone, equities were able to see a silver lining in Goldman Sachs' advice on being "overweight" equities, which kept markets at break even. The deterioration of global growth and tepid inflation is seen within the inter-market charts below.
The first chart, above, is of DB Commodity Index Tracking Fund
The next chart is of Barclays TIPS Bond Fund
China has led global growth expectations lower, beginning earlier this year. The chart above FTSE China 25 Index Fund
Lastly, there is a look at both MSCI Emerging Markets Index Fund
Emerging equity is affected by the dollar in two ways. First, they tend to have heavy exposure to commodities. With a stronger dollar, comes pressure on commodity prices, pushing them lower. This hurts emerging market exports. Next, dollar price appreciation makes U.S. equities more attractive. A strong dollar means equity gains in emerging markets are actually lower in real dollar terms.
Resounding economic weakness and a shift in inflation expectations have provided a catalyst for a relative drop in emerging equities. A bottom in copper and Chinese equity indexes should offer an argument for bottoming in this emerging market ETF.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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