Redwood: Western interests bound up with success of EMs

We are living through a phase when investors say they like Western shares and dislike emerging market shares.

This follows a couple of years of recovery, during which emerging market economies have grown far faster than developed countries, and most emerging markets have risen more quickly than developed markets. The rationale is simple. Investors rightly point out emerging market economies now face substantial inflation, and will rein in money growth in an attempt to stop prices rising so rapidly. Meanwhile, the West, led by the US, tries to retain a loose money policy as it is still concerned the recovery will falter. The newly printed dollars find their way into share markets, and it seems in...