THE TAPER TANTRUM OF 2013
Quantitative Easing and The Taper Tantrum
In response to the 2007-2009 financial crisis and recession, the United States Federal Reserve (Fed) started a large scale bond-buying program known as quantitative easing, with the objective of pumping money into the economy, increasing market liquidity and maintaining economic stability following the crash. In the beginning of 2013, as the US economy showed signs of recovery, the Fed grappled with how and when to discontinue the program. The Fed’s balance sheet had grown by US$2 trillion since 2008 (Investopedia, 2020) and was growing by US$85 billion a month as large amounts of money were being fed into the economy (Reuters, 2019). As a result, on May 22nd, the then-Fed chief Ben Bernanke, stated in a congressional appearance that: “If we see continued improvement [in the economy] and we have confidence that that’s going to be sustained then we could in the next few meetings … take a step down in our pace of purchases”.
Bernanke’s announcement of a tapering in the Fed’s quantitative easing program through a reduction in purchases resulted in an immediate steep rise in bond yields – known as a taper tantrum. During the years preceding the tantrum, financial markets and investors had become increasingly dependent on the Fed to sustain asset prices. Bernanke’s taper announcement came as a negative shock to investors’ price expectations, as the Fed had become one of Treasuries’ biggest buyers (Investopedia, 2020). As such, investors created a self-fulfilling prophecy by panic-selling Treasuries in response to lower price expectations, in turn leading to the taper tantrum of 2013. Outflows from US government debt had reached US$66.9 billion by the end of June, making it one of the worst monthly sell-offs in US market history (Financial Times, 2013).
U.S. 10-Year Treasury Yields following the FOMC1 meeting of June 19th, 2013
The June 19th meeting was intended to calm markets down by reiterating that any changes in the bond buying program were conditional on the changing economic outlook and was different from changes in interest rates. Despite the message, markets continued to be rattled.
1 Federal Open Market Commitee
Economic Indicators that Preceded the Tantrum
From January 2013, to Bernanke’s May announcement, to the Fed beginning to slow down purchases in December, 7 months later, several economic indicators were improving and sending clear indicators that motivated the Fed’s slow-down decision. Unemployment in January was at 7.9% and the PCE price index at 1.7%. In May, unemployment had fallen to 7.5% and core PCE inflation to 1.5%. Fast forward to December and unemployment and core PCE inflation had reached 6.9% and 1.6% respectively (Reuters, 2019).
The taper tantrum of 2013 was somewhat unique as, although the economy was showing signs of improvement, inflation expectations were falling. This was reflective of the fact that investors did not “have a tantrum” due to rising inflation and rising interest rate expectations, that can cut into bond coupons, but solely due to a reduction in the Fed’s quantitative easing program.
Furthermore, although some investors may have assumed that a tightening of global financial conditions could cause the government and businesses, in general, to lose confidence – leading to a spike in unemployment levels – the taper tantrum was considered a temporary adjustment and unemployment levels continued to stabilize along with the economy following the Fed’s actions.
The Tantrum & the Stock Market
Investors expected the taper tantrum to equally affect the stock market, but reactions were more subdued in comparison with the bond market. Following Bernanke’s announcement in June, the Dow Jones fell by 4.9% and later by 5.6% in August, known as “Taper Tantrum 1” and “Taper Tantrum 2” (USA Today, 2013). Corporate bonds and risk assets performed poorly immediately after Bernanke’s statement, both because of the interest rate burden and because of the credit component. However, the period was considered, by some economists, to be too narrow to indicate a trend. The rest of the year pointed that 2013 was a banner year for risk assets, while US Treasuries had a slightly negative total return. In fact, once the Fed definitively started its tapering plans of trimming purchases by US$10 billion per month, the Dow Jones rallied by 1.8% reaching an all-time high.
Rallies in the stock market following the taper were supported by the strong economic data that sustained the Fed’s faith in market recovery. Consequently, this boosted investor sentiment. Additionally, Bernanke’s announcement was received more positively in the stock market as it reduced uncertainty and questions surrounding the eventual, and inevitable, taper.
2 Personal Consumption Expenditures
Effect US – World
A potentially important side effect of quantitative easing was the expansion of global liquidity, which spilled over emerging markets. With a reduction in bond purchases, such markets underwent financial stress. For the most affected, Brazil, India, Indonesia, South Africa and Turkey, known as “Fragile Five”, the building effect of foreign capital inflows into their countries was temporarily removed and their currencies depreciated sharply, leading to financial instability. India and Indonesia, especially, experienced rising current account deficits and other macroeconomic imbalances. The taper tantrum destabilized emerging markets as a whole and fueled fears of a global crisis.
Furthermore, the impact on exchange rates, which depreciated strongly across global markets, was problematic for many countries that were recipients of large amounts of foreign investment.
“Emerging markets are a particular case that had more to do with the starting point than the impact of Fed moves.”
John L. Bellows, PhD
Portfolio Manager & Research Analyst
On the other hand, according to John L. Bellows, emerging market assets were coming off a period of high valuations on the back of exceptionally strong growth and asset inflows in years preceding 2013, which led to an increase in asset values. It is also important to note that previously, growth in these market’s actually outpaced that of advanced economies. In 2013, however, the momentum shifted. Growth slowed and the advantage of emerging markets deteriorated. At the same time, the acceleration in advanced markets increased.
The 2013 taper tantrum was an unprecedented event caused by fears of a collapse in the bond market. Such fears inevitably led to a self-fulfilling prophecy that resulted in the taper tantrum. Although the event was temporary, it serves as a lesson to both individual investors and the Fed. In addition, it was “useful” for economists and researchers to better understand the real effects of quantitative easing in the market as well as highlight the dangers of such a policy when used as a long-term solution. In general, investors and the market as a whole should be aware if it happens again, as even slight shifts in confidence can have material effects on real growth. The economy is interconnected in many ways, and events concerning the US Fed can send shockwaves to all global markets.
EMERGING MARKETS AND CAPITAL OUTFLOWS
Capital Flows/Outflows Determinants
Emerging markets have become particularly significant as recipients of capital flows since the 2008 financial crisis. This increased exposure has resulted in greater dependence on external financing and greater sensitivity to global turbulence. However, there are some differences by region. Thus, while in Latin America the most stable capital flows – direct investment – continue to be the largest, in Asia and the Middle East the recent increase in capital inflows has materialized in the form of debt, private in the first case and mostly public in the second.
Pull factors (or internal factors) are located in the countries receiving the capital and reflect, for the most part, changes in the risk-adjusted return on issued assets, due to changes in growth expectations or macroeconomic prospects, or changes in other risk factors, from price volatility to expropriation risks. Push factors (external or global factors), on the other hand, originate in the issuing countries and tend to drive (or repatriate) capital to (from) abroad because of the reduced (increased) attractiveness of investing in the country of origin of the funds or because of the increased (reduced) availability of funds.
For example, if we analyze possible capital movements from advanced to emerging economies, the main push factors would be monetary conditions in the advanced economies and risk aversion of international investors, while the pull factors would include the growth rate differential with the advanced economies, the return on the recipient’s assets – either on the stock market or through carry trades – macroeconomic stability and the existence of institutions that allow the investor to appropriate the returns obtained.
Portfolio flows received by emerging economies depend negatively on global risk aversion and dollar appreciation (push factors), as well as on the political risk of the recipient country and the growth differential vis-à-vis advanced economies (pull factors). For Latin America, different impacts from the rest of the economies are estimated in the case of commodity prices (positive, indicating higher inflows if these increase) and the appreciation of the dollar (Molina & Viani, 2019).
Emerging Markets FX & Commodity Prices
Emerging markets currencies are troubling for investors and great for speculators. The growth opportunity in these countries is sometimes offset by the extreme uncertainty in the political and economic environment, wheater that be inside the country or outside its borders with something completely unrelated. Over the last decade, EM currencies have underperformed immensely against the “established” currencies, which has made it difficult for these countries to repay dollar denominated debt in the long term. Commodities, such as oil, play a huge role in energy importing countries, such as India. As oil is pegged to the dollar worldwide, India needs to pay for its imports in dollars, which are increasingly more valuable against the rupee.
Geopolitical risk is at a high with tensions brewing in the South China Sea and in Taiwan, which can escalate to other conflicts in other emerging economies, coupled with a possible transition of power in the US Administration due to President Joe Biden’s age and frequent slip ups in public speeches.
As global trade begins its journey back to its Pre-Covid levels, EM FX will need to set the tone in 2021 in order to survive higher commodity demand. The beginning of the new decade has all the ingredients of a volatile environment, with the Turkish Lira getting all the attention for now as the President of Turkey fired the Governor of the Central Bank amid a surge in inflation.
When a major economic event happens, such as the Federal Reserve announcing a future tapering of its quantitative easing policy, the Covid-19 lockdowns or a simpler event not priced in, it triggers investors and algorithms to run for the exits and find safe haven assets. Usually the US Dollar or the Japanese Yen.
The problem with these events is that every market participant wants to sell and no one wants to buy, so this move is exarcebated by the urgency of the sellers. Think of it as crowded stadium with one exit.
Emerging market assets, such as bonds and currencies, are usually the most affected. These high yielding instruments prove to be great when the economic panorama is stable, but when panic arrives, Emerging Markets are second guessed, simply because they are considered risky in a risk-off environment and cannot compete with the high liquidity, world reserve currency status of the US Dollar or the quality of the Japanese Yen due to its trade surplus.
For emerging markets, the lack of access to a dollar swap line brings huge spikes in rates, and consequently, of course, periods of extreme volatility. When the Federal Reserve promised to stop raising rates in the end of 2018, the dollar became fairly stable, allowing emerging market government bonds to rise in price. The problem that unfolded was that the dollar was in a relatively strong position before the Coronavirus Pandemic, as well as sovereign debt government bonds. When the pandemic hit the financial markets, it hit harder in emerging markets. Investors were trying to get out of these bonds that were in a different currency than the dollar, causing an unbelievable spike in rates. It was only after the Fed had cut rates and announced that it would provide support to financial markets, making the dollar cheaper and flow around the world, that these bonds became attractive again due to investors’ confidence of the Federal Reserve to act as a backstop for the market, thus promoting a risk-on environment.
How Attractive are Emerging Markets Post 2020?
Emerging economies are currently experiencing slow economic growth and more subdued financial inflows accompanying the end of the commodity super-cycle and the Covid-19 pandemic. Global factors, most notably international commodity prices, have a strong association with cyclical movements in capital inflows to emerging markets. This is particularly true for Latin America. At the same time, country-specific structural factors, such as good governance and sound institutional and regulatory frameworks, play a key role in attracting capital flows over longer-term horizons, for emerging markets, value stocks rallied strongly in November and extended their gains into December in anticipation of a global economic recovery in 2021. After 10 years of underperformance versus growth equities and many false starts, value stocks rebounded strongly in November and extended their gains through December in anticipation of a global economic recovery in 2021.
Economic recovery will depend crucially on the vaccination schemes in place in countries; while many wealthy nations have been able to produce or purchase enough doses to inoculate their populations several times over, some less developed countries are struggling to secure supplies. Tedros Adhanom Ghebreyesus, director general of the World Health Organization (WHO), warned that unequal distribution of vaccines risks prolonging the pandemic. One region that has had considerable success in importing vaccines and implementing mass vaccination programs is the Gulf. On December 10, Bahrain announced that it would provide the vaccine free of charge to all citizens and residents, having approved the use of Chinese-made Pfizer-BioNTech and Sinopharm vaccines. Elsewhere, Saudi Arabia, the United Arab Emirates, Kuwait, Oman and Qatar launched their vaccination campaigns in late December. Unlike the Gulf, Latin America is still working to increase vaccine availability and accessibility. Some countries, such as Mexico, Costa Rica and Chile, have successfully negotiated batches of Pfizer-BioNTech vaccine; early population immunity will lead to further economic growth.
EUROPEAN RESPONSE AND FRAGILITY
Inflation in the Eurozone and future expectations
The new Covid-19 crisis has left a negative impact on the global economy. One year after the beginning of this crisis, there are still many doubts about its effects and significance. After the 2008 crisis, the European Central Bank (ECB) has been assuring and increasing liquidity, preventing the increase of interest rates, in order to encourage companies to invest and increase production. Investors are now concerned that inflation could get out of control in the next months.
A global recovery seems to be slowly starting. The Eurozone inflation rate was confirmed at near 1-year high, prices of food and fuel are increasing and metals such as copper are trading at very high levels. Moreover, when social distancing is relaxed, pent up demand will lead to a burst in spending, and some inflation. There seems to be more than enough signs that prices are only headed higher from here.
However, we need to be aware that these inflation fears may well disappear as quickly as they emerged. Even though we might get a possible initial elation phase, the Eurozone economy will probably not reach pre-crisis levels before 2023/2024. Unemployment is expected to remain high compared to pre-crisis levels which will prevent a significant wage growth.
Precautionary saving is going to play a determinant role, revolving to low consumption. Uncertainty will lead to low investment; unlike a war, there is no capital to rebuild. Monetary and fiscal policies goals will probably be to sustain demand and avoid deflation rather than the reverse.
This is why low inflation will probably occur for the next few years. We are, however, operating in a volatile environment, and the standard way of thinking about inflation may be wrong.
Currencies normally fluctuate because of interest rate movements, when trade balances change or geopolitical crises erupt. Hence, currency fluctuations are a daily global phenomenon.
Since last year’s April, the US dollar has been losing value against the euro. By August 2020, the euro exchange rate had risen to around 1.20 dollars – from under 1.10 dollars in early summer. The European currency seems to have benefited from the Coronavirus crisis, surpassing experts’ forecasts.
For the second half of the year 2021, the majority of the banks anticipate that the Euro will strengthen against the US Dollar. However, besides the possibility of the coronavirus getting worse throughout 2021, there are still many other factors that make these predictions quite uncertain:
- If the US economy starts recovering, US political tensions calmed and the Federal Reserve Bank increases interest rates, that will support the US dollar;
- If China’s economic growth slows down, it will decrease China trade, and consequently demand for European imports will diminish;
- Uncertainty of Brexit future political and economical effects might lead to a weaker Euro rate relative to other countries;
- The possibility of the European Union economy slowing down can sap global growth which will traduce in the fall of Euro value.
As of now, we can’t predict when the global economy will stabilize, mainly due to the Covid-19 crisis. China has already started its economic recovery and the United States might as well start to follow it. European recovery seems more uncertain and slower.
Euro Zone Government Bonds
On the 18th Thursday, Euro zone Government Bonds rose in early London, following the upward movement in U.S Treasuries. The U.S yields hiked as the European markets opened, namely with the 10-year Treasury yield skying above 1.74% for the first time since January 2020.
The U.S Federal Reserve announced its devotion to keep its target interest rate near the zeros and declare that it expected higher economic growth and inflation in the U.S, during the current year. In a broad perspective, it is not hard to spot that these bold statements by the FED are being made during a period of drastic uncertainty in the general markets outlook. Furthermore, the Federal Reserve said that it will “sit idly” in a new experimental framework of allowing inflation to overshoot.
Simultaneously, Europe’s Government bond yields also rose but to a lesser extent, as it is observable in the graph. The Germany’s benchmark 10-year Government bond yield was at a 20-day high and Italy’s 10-year yield was around 1 basis point up too. The long end of the curve climbed even more, with the German 30-year yield reaching its highest since January 2020.
In order to better understand the fragility behind the Euro Zone economics, it is necessary to comprehend the reasons behind the rise in the U.S Treasuries yields.
Firstly, the 1.9 billion dollars stimulus emitted by the U.S Government is linked to a need of money to finance that checks. As the Government cannot produce money, it must be the central bank to print money in order to lend it to the Government. This process is called monetization and it is typical of the end of a long-term debt cycle, where the Government creates a lot of debt and then monetizes it.
With the purpose of injecting a fiscal stimulus to the American economy, the U.S Government needs money and consequently, there is a need to sell bonds. When the bonds offer low return, there is a negative return in bonds relative to the inflation, showing a negative inflation index bonds yield. Thereafter, the Governments needs to sell a lot of debt and that means that there will not be enough demand for all those issued bonds, and that is why the interest rates are rising.
With respect to the future perspectives of the U.S economy, or the interest rates rise a lot, or the FED print more money in order to buy those excess bonds, in an attempt to hold the interest rates stable. By printing money, the FED holds the interest rates down but creates a depreciation in the value of the dollar and raises inflation pressures.
Concerning the Euro Zone economics, it is notable that the Europe’s economy is directly related to the American one and there are some points to stress out regarding the Europe’s fragility to the U.S’ applied policies. Firstly, the two economies are clearly different, as the EU is based in a social-welfare system and the US in a capitalistic one, pointed out by the supports that the bonds are based. The EU bonds are well supported in the continent fundamentals, as it was seen the German 10-year bond yields correcting to hit their 5-week low, in response to the third wave of coronavirus infections and renewed lockdown measures.
Secondly, the FED’s passivity creates an outlook of uncertainty and there should be a concern about the hike in inflation, as it can became something more sustained and robust. Also, the recent rise in the long-term yields that it has been witnessed, is nothing more than term premium, which is the same of uncertainty.
Thirdly, it is plausible to consider the declarations of the president of the ECB, Christine Lagarde, saying that the central bank will not respond to temporary changes in inflation and will prevent a rise in the interest rates if they get ahead of the economic recovery, forcing the principle that European bonds are in accord with their fundamentals.
Therefore, Europe does not have the fiscal stimulus that the U.S have or the UK’s pace of vaccine rollout to justify a hiking move in treasury yields. So, the Euro Zone is always likely to be lagged in relation to the scenario of rising yields in U.S or in the U.K, and, for that reason, the ECB is moving more dovish than the Bank of England and the FED.
In a final note, the fiscal stimulus launched by both the U.S and Europe are having an impact in the commodities markets, raw materials prices and in the relative strength of the U.S dollar. Since the beginning of the year until Friday, March 26th, the Brent Oil futures rose 24%, the WTI rose 25%, the copper market rose 16% and the corn futures rose 14%, which demonstrates a generally uptrend. As learned during the mid-2010s, a stronger U.S dollar will impact inflation through commodity prices (rather than consumer goods). For this reason, a crucial factor to anticipate how the currency will affect inflation is the behavior of the commodity prices. With the relative strength of the dollar gaining momentum, this will be a problem for many of the emerging economies (where inflation is already rising) and economists are already worried that this may touch to the least developed economies, such as Portugal. This problem will force the Central Banks to change their strategy, by tightening and cutting up the available credit to the countries, which will complicate the access of these economies to debt financing (Portugal’s debt is 150% of the GDP) and might trigger off a financial crisis.
WHAT TO EXPECT FROM THE FEDERAL RESERVE?
In 2013, the taper tantrum initiated after the then-Fed chief Ben Bernanke announced the pace at which the asset purchases were going to be slowed. The announcement of the winding down of the quantitative easing programme, changed completely the expectations of the markets regarding the evolution of interest rates. Even though the Fed did not modify its Federal Funds Rate, the rapid increase in the Treasury yields was enough to produce a huge destabilising outflow of “hot money” from the emerging markets.
The current economic environment, despite being very different from the one in 2013, has brought the long shadow of the taper tantrum to the mind of investors and policymakers around the globe. The reasons behind the taper tantrum nowadays are not directly related with the monetary policy decisions of the Fed. Instead, the brighter economic outlook of the American economy is the main reason why the taper tantrum has been triggered.
Evolution of the Treasury market
Since the end of February, the state of the US Treasury market has caught investor’s attention and has raised a lot of alarms as a new taper tantrum may be unfolding. The recent increase in US yields, has become a source of concern for market participants as it has initiated outflows of “hot money” from the emerging markets again.
This time, the increase in yields was related with a lack of liquidity in the market produced by an accelerated sell-off of Treasuries. The main driver of this dump of Treasuries can be explained by the rise in inflation as a consequence of the expected recovery of the US economy. The inflation expectations of the markets can be shown through the 10-year break even inflation rate calculated taking into account the yields of the Treasury Inflation-Protected Securities and the nominal yields of the Treasury bonds. Right now, following the increases of the last weeks, the 10-year break even ratio is around 2.3% a level last seen in 2013.
The fast roll-out of vaccines, the expected pent-up demand and the recent pass of the $1.9 trillion coronavirus bill are behind the improvements of the economic outlook.
In addition to this, some market participants have also pointed to the regulatory environment and the uncertainty concerning the extension of the modifications introduced in the Supplementary Leverage Ratio as one of the causes of the rise in yields.
The modification, expiring the 31st of March, excludes the Treasuries and deposits from the calculation of the SLR. Some analysts have argued that the uncertainty about the renewal of the modification has already prompted big banks to sell huge amounts of Treasuries and, if not renewed, it could create a new dump of US bonds in the market. On March 19, the Fed announced that the SRL will expire as scheduled.
The likely increase in growth and prices during the next months, despite being positive from an economic point of view, it is not very convenient for the financial markets, at least in the short term. The explanation of this has to do with inflation and the negative effect that it has on bonds and equities. When it comes to fixed income, inflation erodes the value of the fixed coupons, making those bonds less attractive. As exemplified by the US Treasuries, the reduction in demand reduces the price and increases the yields of the bonds. In the case of equities, inflation erodes the value of the dividends, reducing the market appetite for stocks.
What have been the reactions of the Fed so far?
In the past decades, spikes in inflation reaching the 2% were soon followed by pre-emptive monetary policy tightening. This reaction was explained by the symmetric mandate that the Fed was following, aimed to fight undershoots and overshoots in inflation. However, the scarring effects seen right after the Great Recession and the slow recovery of the American economy at that time, have produced a big shift in thinking at the Fed. This shift was reflected through the change of the Fed’s monetary strategy that took place in August 2020. Since then, the monetary institution has been applying an Average Inflation Strategy (AIS), far from its previous mandate. With the AIE, the Fed is now targeting a rate of inflation of 2% in the medium and long term, tolerating inflation overshoots in order to compensate for the periods in which inflation was below 2%. Regarding the inflation overshooting, the Fed declared that the spikes in prices will be closely followed and, as long as they are moderate and limited in time, there will not be any intervention. On the contrary, if the increases of the level of current and future inflation do not evolve according with the central bank’s objective, the Fed will act forcefully to tame inflation. In addition to the new strategy, the monetary institution also tweaked its approach to unemployment. The change was mainly motivated by the limited effects of lower unemployment on inflation during the last decade. In the past, low levels of unemployment, above the so-called natural rate, were soon followed by sustained increases in inflation. As the last years show, this relationship, known as the Philips Curve, seems to be broken or at least, less obvious today.
The new approach followed by the Fed means that the American central bank will hold a dovish line in the near future. As Powell declared right after the last Federal Open Market Committee, the improved outlook of the economy remains uncertain and highly dependent on the virus. As a result, he pointed that “the Fed is not ready to even start talking about reducing the support to the economy”. He also declared that there will not be increases in the Federal Funds Rate until, at least, 2024. The pace at which the Fed is conducting asset purchases is also likely to continue in the foreseeable future.
The decisions of the Fed in regard to inflation and asset purchases were clearly anticipated by the market participants. Although, there is still a lot of uncertainty surrounding the variable that has been creating financial turmoil during the last weeks, the level of the Treasury yields. When asked about this, Powell answered that “the overall financial conditions of the economy remained accommodative”, reinforcing the thesis that the Fed has been supporting during the last months. For the central bank, the increases in yields are a product of the improved outlook and, for the moment, since the increase does not harm the recovery, they are not concerned about the level of yields. This, leaves unanswered the most important question for the financial markets today, how high is too high for the 10 years yields?
Some analysts have been drawing parallelisms between the taper tantrum of 2013 and the current situation as in both cases, the Fed has downplayed the rise of long-term yields. This rise, as mentioned above, was one of the main reasons behind the taper tantrum seen in 2013 and, probably, will continue feeding the “hot money” outflows that we are seeing today. Expect a bumpy road ahead.
Is Yield Curve Control a feasible tool for the Fed?
One of the questions that may appear while thinking about the increase in the Treasury yields is the feasibility of Yield Curve Control (YCC) in US. The YCC, can be described as a policy conducted by the central bank that is aimed to control rates along some proportion of the yield curve through the imposition of caps. Nowadays, there are just two countries in which YCC is being used, Japan and Australia. In the past, this monetary policy tool was also used, with positive effects, in the US during the World War II.
In June 2020, the Fed already discussed about the implementation of this tool. At that time, the opinions of the officials were divided as some of flagged concerns about how to implement it. Most recently, Peter Harker, the president of the Federal Reserve Bank of Philadelphia, when asked about the current evolution of yields and the feasibility of YCC in US, declared that “all the options were on the table”. From our point of view, taking into account the expected huge emission of debt coming from the Biden stimulus and that Fed is already purchasing $80bn of Treasuries on a monthly basis, the YCC can be one of the next monetary policy tools used by the US central bank in case a “disorderly” move in yields that cannot be controlled by forward guidance policies takes place.
THE TAPER TANTRUM OF 2013
EMERGING MARKETS AND CAPITAL OUTFLOWS
EUROPEAN RESPONSE AND FRAGILITY
WHAT TO EXPECT FROM THE FEDERAL RESERVE?