Wellington Management's Natasha Brook-Walters: Divergence is not just about central bank policy

Interest rates

When America sneezes, the rest of the world catches a cold. But in a more divergent world, does the saying still hold true?

Since the late 1990s, when the US cycle turned, the rest of the world generally followed, with a lag. As a result, central banks have tended to follow the Fed's lead. However, the new economic era — with its greater volatility, higher inflation, and shorter and more frequent cycles — is likely to result in greater cyclical divergence between countries and the need for different central bank responses. How is potential central bank monetary policy divergence affecting asset allocation? We are already seeing this play out — most notably between the US Federal Reserve and European Cen...