The head of the IMF, Christine Lagarde, spoke yesterday about recentglobal economic “turbulence” caused by the threat of normalized US monetary policy. To quote, “… the US has a special responsibility: to implement it [change in monetary policy] in an orderly way, linking it to the pace of the recovery and employment; to communicate clearly; and to conduct a dialogue with others.” With just the threat of a taper, several emerging market currencies sold off in Q3 (Brazil real down 9.4% vs. the dollar, Indian rupee down 8.6% vs. the dollar) with a few developing country equity indices also declining in value (Brazil IBOV down 14% ytd). A recent IMF study found that equity prices are a lead indicator of recessions, which should give Brazilian investors pause. As the US normalizes its monetary policy, there will likely be ripple effects across the globe, which will have substantial consequences for non-dollar stocks and bonds. Why does this matter to US dollar investment grade fixed income investors? Global upheaval usually leads to a rally in high quality US bonds and will likely cap how far rates will rise over the next year. In our recent MIM “Why Own Bonds,” we highlighted the low correlation between bonds and stocks as a key attribute and reason for owning bonds. Rates move up and down, investment fads come and go, but intermediate high quality bonds are a core asset class that can be depended on for liquidity and long term, consistent, positive, low volatility returns.