Your loyal correspondent spent a good deal of his time as a graduate student in international affairs in the mid-1970s with Washington defense intellectuals, several of whom were superannuated Cold Warriors and several of whom would go on to become, for better or for worse, household names over the next three decades.
As the Soviet Union was still a military colossus and the United States was mired in its Vietnam hangover, the assembled Dr. Strangeloves spent a good deal of time worrying about what would happen when the Big One hit. This left at least one youthful participant wondering what difference any of their plans would make as we all would be crispy critters, or worse, if things got out of hand.
So it is with financial crises. You can spend a lot of time worrying about what will happen during the next crisis, as if it will have similar characteristics, causes and ultimately cures as the last one. Even if investors and traders do not do this on their own, they find the playing field has been changed for them. After all, the history of financial regulation is nothing but a series of measures enacted in the aftermath of one crisis that offer little in the way of preventing the next crisis.
Some markets become poster children for financial crisis, or what we might call the “risk-off” portion of the risk-on/risk-off cycle. Emerging market equities certainly fit that bill. Rightly or wrongly, no one advises clients to up their exposure to Indonesia, Malaysia, Mexico, Brazil, et. al., once the shooting starts.