How global tightening will affect emerging market stocks, the Federal Reserve's fuzzy guidance, and Italy's flailing growth rates.
We bring you some of our favourite analysts’ picks of the most important graphs this week.
Julian Jessop, chief global economist at Capital Economics
Fears that US monetary tightening will prompt a collapse in emerging market (EM) assets are grossly overdone. Crucially, as the chart shows, EM equities in general have failed to benefit much from loose US monetary policy in the first place. Instead, they have been substantially under-performing developed markets since 2011, mainly because of the structural slowdown in the Bric economies.
Alexander Dryden, analyst at JP Morgan Asset Management
In this week’s statement the Fed indicated that it has now shifted in forward guidance away from qualitative guidelines such as unemployment rates and towards more qualitative assessments. This suggests that future monetary policy will be determined by a broader range of economic factors rather than specific thresholds.
These changes are similar to the shift in policy that the Bank of England adopted earlier this month but despite these changes rates will still move higher. Going forward it seems that monetary policy is becoming more of an art and less of a science.
Christian Schulz, senior economist at Berenberg
Italy has a problem. But it is lack of growth, not excessive public debt. Former Prime Minister Mario Monti got it wrong – tax hikes were all he was allowed to do in 2012, and as a result the economy tanked. New Prime Minister Matteo Renzi promises to get it right.
Labour, tax and public administration reforms are exactly what Italy needs to kickstart growth. Renzi's popularity gives him a good chance to get reforms implemented, because he need not fear elections.