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June 2014 - CHUGGING RECOVERY
In a number of developed countries, including the United States, the economy slid backwards in early 2014. Although the drop was largely due to temporary factors, it underscores the fragility of the current phase of the economic recovery. This precarious position, combined with low inflation, has compelled central banks to maintain highly accommodative monetary policies. However, it contrasts with market optimism, which has pushed risk premiums further downward for most asset classes. The result has been a marked return of capital flows into emerging markets, despite certain persistent imbalances and the structural growth slowdown at work in those countries.