Global stocks are finally taking a breather from their apparently inexorable march upwards, as both developed and emerging equity markets have slumped significantly over the last couple of weeks. While no definitive connection between the two events can be made, it seems more than coincidental that this market downturn comes just weeks after the U.S. Federal Reserve announced that they have begun the long-awaited “taper” of their bond-buying programs.

Societe Generale’s Cross Asset Research published a report today elaborating on this theme, and pointing out that both gold and treasuries have outperformed equities since the taper was announced.

Gold and treasuries outperformed equities since taper

Investors have evidently decided it is time to take some profits from the global equity bull run and begin moving assets to safe havens. Cross Asset Research lead analyst Andrew Lapthorne and colleagues produced an informative chart detailing the performance of developed and emerging market equities versus gold and U.S. treasuries since the announcement of the Fed taper a few weeks ago.

Global Equities Gold Taper

Currency volatility becoming serious issue

Lapthorne also highlights the emerging market currency volatility we are seeing as a potentially serious issue confronting the global economy. “…rather it is the continuing sound of currency volatility reverberating through Emerging Markets that is more worrying. With inflation numbers already very low in the developed world, the last thing you need is a round of violent currency devaluations à la the Asia crisis of the 1990s. Economists will tell you that repeat of an Asia-type crisis is highly unlikely – but I distinctly remember hearing similar views back in 1997.”

The report also points to the current crises with the Argentinian peso, Turkish lira and Ukrainian hryvnia as examples of ongoing global currency volatility that can have serious ramifications if these situations lead to “contagions” that impact the international economic system.