Do you remember the decoupling rage— based on the belief that emerging market equities would do well even if the rich countries were in trouble? That idea got a decent burial during the financial panic in the wake of the collapse of Lehman Brothers at the end of 2008.
There is now a twist to that story. The first three months of this year have generally been glum for emerging market shares, but a pretty good time for US equities. According to the latest data available when this column was being written, the MSCI Emerging Markets Index was down 2.14% since the last day of December while the Dow Jones Industrial Average was up 11.25%—a relative underperformance of nearly 13.4 percentage points.
Is this decoupling 2.0? The US economy does show signs of recovery and corporate profits are healthy, but the biggest reason is still the flood of liquidity unleashed by Western central banks.