Which markets suffer most from a hawkish Fed?

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Goldman with an interesting, Basically, US rate shocks are Chinese growth shocks.

Our global financial conditions index (FCI) has tightened, in part because the Fedhas turned more hawkish in the face of rising inflation but slowing growth. Where are risks to growth from FCI spillovers largest? We estimate rules of thumb for the impact of US monetary policy, growth, and inflation surprises on our FCIs via long rates, equities and the trade-weighted exchange rate index(TWI).

We find that a 100bp hawkish Fed surprise tightens our global FCI by much more(40bp) than a 1pp positive US growth or inflation surprise (both roughly flat). OurUS FCI tightens in response to all three surprises, as do our EM FCIs (to varying degrees), while the effects on DM ex. US FCIs are more mixed.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.