Dollar will continue falling substantially vs DM currencies, but next dollar down will be deflationary for EMs, not reflationary. Unprecedented divergence - falling dollar and EM stock prices will become positively correlated, breaking historical negative correlation.

US running large current account deficit funded by portfolio flows. Inflows into US stocks will diminish, necessitating current account narrowing through weaker imports. Dollar has to fall to shrink US imports, which is negative for global manufacturing and commodity prices.

Calling for regime shift in global investment landscape. If portfolio flows into US decline from $1.5T to $700-800B over next 12 months, dollar will fall to force adjustment in US imports.

If portfolio flows don't decline, view at risk.

If commodity prices decline (base scenario 6-12 months), South African equity and currency will take hit. Structurally, lack of investment leads to low productivity, unsustainable public debt trajectory.

Bullish on EM local currency debt as dollar falls and inflation slows, allowing central banks to cut rates. Favorite is Mexico. EM dollar bond spreads very low - if corporate spreads in US widen, this asset class will be hit.

Domestic bonds will do much better than US dollar EM bonds.