Ignoring the 800 Pound Gorilla

In a sharp reversal to its 2007 performance where Emerging markets rose 42% and Developed markets gained 9.4%, both are now significantly down for 2008 with Emerging down 8.4% and Developed wiping out its 2007 gain by posting a 9.7% loss (the S&P 500 is down 9.8%). But the current housing situation, which started all this, was only suppose to be a U.S. problem, not a global one. While a slight inconvenience to developed markets, such as the U.K. or Japan was expected, Emerging markets were growing so fast that any minor annoyance from the U.S. would be muted by their own growth. The conventional wisdom was that the U.S. was yesterday’s news and yesterday’s growth — its manufacturing had been outsourced, its companies now looked to foreign markets for sales and quick cash infusions, and its dollars pour out for oil by the billions.

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