On Wall Street they call it "hot money"—that seemingly endless flow of cash that goes to the most profitable country du jour—but in the real economy it's gone cold.
That hot money has come mostly in the form of a low-yielding U.S. dollar, which investors have borrowed en masse to fund investments in other higher-yielding currencies across the globe. The so-called carry trade has helped fuel an investment bonanza across the world that has boosted risk assets thanks primarily to the U.S. Federal Reserve's easy-money policy.
But with the Fed tiptoeing away from what initially was an $85 billion-a-month infusion of liquidity, investors are beginning to prepare themselves for a world of rising rates in which the endless cash flow to emerging market economies begins to ebb, then cease.
Consequently, global equity markets have been on a wild ride in 2014, with many market pros expecting the volatile wave to continue.