The rich will converge, the poor will not.

"The divergence among economies, and the asset-price dispersion that has come with it, remains one of the key global issues for policy makers and investors this year," wrote M El Erian. Normally markets in advanced economies tend to perform in tandem. "Global economic patterns, especially among advanced countries, tend to be dominated by correlation rather than divergence because of the depth of cross-border trade and financial linkages." The World Bank and the International Monetary Fund "embraced the notion of a synchronized pickup in global growth", but "Since the beginning of this year, the yield on the benchmark 10-year US Treasury bond has risen by 80 basis points to 3.21%, while the yield on the German 10-year bond has remained essentially unchanged at 0.4%." Which seems a little odd because the rate of inflation in the US is at 2.28%, which is almost similar to that in Germany which is around 2.25%. Unemployment levels in both countries are also almost similar. The US has an unemployment rate of 3.7%, while that in Germany was a tad higher in August at 5.1%. In other respects the US and Germany are completely different. Germany shares a common currency with 18 other countries of the Eurozone where consumer price inflation is at around 2% and core inflation is at 1% and the unemployment rate is around 8%, with enormous variation between different countries, from a high of over 20% in Greece to a low of 2.4% in the Czech Republic. The US had a current account deficit of $462 billion in 2017 while the European Union had a surplus of $387.1 billion, of which Germany is set to record a surplus of around $300 billion. "Then there is the eye popping dispersion in stocks. So far this year, the S&P index has outperformed the German DAX by 14 percentage points and the EEM index by even more." While the Federal Reserve is set on tightening its Funds rate the European Central Bank has kept its borrowing rate at 0% while reducing its bond buying program. Despite such enormous differences El Erian believes that western economies will converge but "not just yet". However, there are many unknowns. German Chancellor Angela Merkel is to step aside, the trade war with China and the looming economic collapse in Iran. So how will economies converge? Will the US go down or others come up? R Sharma thinks that growth in the US maybe peaking and a correction is due soon. If there is a big correction in the US emerging markets are going to feel the pain because many of them are running large current account deficits and have falling currencies. The rich will converge while the poor diverge. That is what El Erian is hinting at.