If you want to know what the combined forces of a slowing China, tightening Fed and a mercantilist Europe are doing to the global economy then look no further that a couple of charts today from BofAML:
That looks like extreme positioning but then consider the bull run enjoyed by emerging markets virtually uninterrupted since the millennium. This trade could run much further, indeed, the only thing that can reverse it is a pausing Fed, which will come, but even then the trend will remain intact.
Emerging markets always go hand in hand with commodities. One reason is they export a lot of them. Another is that the ebbs and flows of US dollar strength determine capital flows into both. This time around both of those are being reinforced by the Chinese adjustment, which is slowing demand for commodities and putting upwards pressure on the dollar via devaluation and as it sells Treasuries to fight capital flight.
