How are investors positioned and where is money flowing?

December was more positive for EM equity ETFs with only Brazil lacking an invitation to the BRIC inflow party. The fall in oil impacted US HY credit and as a result these ETFs had outflows, but investment grade credit remained popular both in the US and Europe.

In mid-December crude oil volatility gushed up above 50% where it has remained ever since (see OVX Index). Volatility has spilled into other markets as concern mounts that this is a story that is about demand as much as it is about oversupply. The volatility slick has grown to encompass equity markets as well as fixed income and FX, but a clean-up has already started in markets that were oversold e.g. some EM currencies such as INR and TRY where a low oil price should provide a boost to growth.


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