I've constantly got to face clients about the impact of tapering on stocks and bonds. They seem to believe that by delaying the inevitable, we could see the economy grow a few more years.
My opinion is to the contrary. QE has harmed many emerging countries. The extra money that was printed was supposed to boost the US, EU and Jap economies ( the countries that print money) but they have flooded into hard assets in China, Indonesia, India and Brazil. How do I know? Just look at the price to income ratios of these countries for residential properties. Singapore's is over 20, so is Hong Kong's. Chinese cities regularly hit 40x. The yields are at record lows.
Inflation in emerging countries shot up because of asset inflation, fuel and food prices rising too fast. Because of rising fuel costs, transport costs also shot up. Wages rose as a result of inflation but exports haven't picked up.
When tapering starts, between Oct 2013 and Mar 2014, many investors that bought assets at high valuations, low yields will get burnt badly. It is paradoxical that hard assets in Europe and the US are at record lows while equities' valuations are high.
My advice is: sell your Asian hard assets and buy Asian equities slowly. Sell your US equities and buy US and European hard assets.
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