Goldman Sachs Group Inc. cut its forecast for U.S. economic growth in the wake of Manchin’s move against the Biden administration’s roughly $2 trillion tax-and-spend program. Goldman slashed its real gross domestic product projection for the first quarter to 2% from 3% previously.
The backdrop of monetary-stimulus tapering in major economies is also adding to trouble for developing-nation assets.
The removal of accommodative monetary policy by many major central banks “will hit emerging markets hard”, along with other risk assets that are dependent on plentiful liquidity, according to Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. “EM is likely to remain under pressure as we move into 2022.”
Emerging Markets
Every developing-market currency except the yuan has weakened against the greenback over the past six months. The Turkish lira, which has been under pressure after President Recep Erdogan flagged an economic model that relies on lower borrowing costs, slid to an all-time low on Monday.
In stocks, the MSCI Emerging Markets Index has slid more than 7% this year and was down 1.9% today.
On Friday, the S&P 500 gauge extended its weekly slide in a session of heavy trading volume. With the holidays fast approaching, it could have been the last day of 2021 with enough liquidity for investors to trade in and out of large positions.
“Unless we see this flow turn around then it feels like we could be at the mercy of position squaring, rather than chasing, and longs taking some off the table ahead of the calendar year-end,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note to clients.
—With assistance from Naoto Hosoda, John Cheng, William Shaw and Neil Chatterjee.
This article was provided by Bloomberg News.