In this issue, we examine some of the drivers of the selloff in September and their implications for portfolio strategy.  In particular, we look at what is ailing the emerging markets (besides low commodity prices).  We also examine China’s economic situation and why the Federal Reserve is struggling to “normalize” interest rates.  We conclude the following:

1. Emerging market assets are highly unlikely to provide attractive returns until governments undertake additional structural reforms.
2. It is going to be very difficult for the Federal Reserve to do much in the way of normalizing interest rates until growth starts to accelerate.
3. China has more ability to act than do western economies.  As such, how China responds is key to understanding how global economic data might unfold.

Read the entire report for more details and insights.