Goldman: EM crash is GFC “third wave”

From Goldman via FTAlphaville comes the Chimerican unwind thesis I’ve been describing for several years:

The financial crisis can be viewed as a number of separate but related waves. Wave 1; the US Wave started with the housing market collapse, spread into a broader credit crunch and ended with the Lehman collapse and the start of TARP and QE. Wave 2; the European Wave began with the exposure of banks to leveraged losses in the US and spread into a sovereign crisis, given the lack of a debt sharing mechanism across the Euro area. It ended with the OMT, promises to ‘do whatever it takes’, and finally the introduction of QE. Wave 3; the EM Wave coincided with the collapse in commodity prices.

This revolving crisis, coming in three waves, has disrupted the typical path of equity market recovery. In most historical cycles we can identify four distinct phases in the equity market, which we describe as ‘Despair’, ‘Hope’, ‘Growth’, and ‘Optimism. While all markets entered a classic ‘Despair’ phase around the US stage of the crisis and the global economic downturn of 2009, and then began a strong ‘Optimism’ phase in response to US QE, the recovery phase was knocked off track in Europe by the emergence of the bank and sovereign crisis. EM markets were moving into Optimism, supported by very accommodative US policy and credit growth. But as Europe finally entered a ‘Growth’ phase in 2012, bolstered by aggressive policy easing, EMs were just entering their next ‘Despair’ phase.