The old cliche that when America sneezes the rest of the world catches cold is about to be tested and this time it may be just the U.S. economy that ends up with the major aches and pains.
Investors agree that the U.S. economy is heading for a slow patch, with data such as Thursday's negative Philadelphia Federal Reserve business activity survey persuading some that it could be a far harder landing that they had banked on.
Although the report is no more than a regional sounding from within the vast and diverse U.S. economy, market reaction underscored global fears about the impact of an ailing America.
Assets as diverse as European shares and Mexican pesos took a hit.
The longer term issue for most investors, however, is how much a cooling United States will affect the rest of the world.
Decoupling the ability of Europe, Japan and various emerging markets to break free from a slowing U.S. economy is being increasingly heralded and determines many decisions about stocks, bonds, currencies and interest rates.
The traditional view is that the U.S. economy remains the main engine of world growth and that when it slows particularly when U.S. consumers stop spending global growth will shudder accordingly.
When we look at history, decoupling is (rare), said Klaus Wiener, head of research at Italy's Generali Asset Managers. A slowdown that originates in the U.S. will be felt elsewhere.
There was quite a risk that the slowdown will be strong over the next couple of years, a view that makes him favour medium to long term bonds and not equities.
France's AXA Investment Managers thinks similarly. It reckons the environment favours government bonds over 12 months and is defensive within equities.
A decoupled growth scenario is difficult to imagine, wrote Sebastian Paris Horvitz, the firm's chief investment strategist.
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But that is exactly what a number of firms are imagining.
While they expect the global economy to ease, they see no reason why the United States should drag it down too far or overly damage prospects for a variety of non U.S. assets.
There is too much focus on the U.S. consumer, Stephen Dowds, head of international equities at Northern Trust Global Investments, said at a Reuters briefing this week. The worry ... is overdone.
Dowds argues that resurgent economies in Europe and Japan are likely to pick up the slack with consumer spending there likely to rise and business to grow. In terms of growth prospects, you have more to come, he said.
Those who share his view will have noted that the Philly Fed report was followed closely by data showing rising confidence among big Japanese manufacturers and French consumer spending at its highest in 7 years.
Bond giant PIMCO also reckons the effect of an appreciably slower U.S. economy on others' growth should be mild. In the case of emerging markets, for example, it sees good fundamentals and large currency reserves helping countries to weather the storm.
In general terms, the contagion risk of decelerating growth in the U.S. is much less than has historically been the case, Paul McCulley, one of PIMCO's top strategists, said in a note.
A leading investment bank has also sounded the decoupling horn. Merrill Lynch said in a special report this week that Asia as a whole plus, Japan, India and Brazil would decouple while the euro zone had a good chance of avoiding the worse effects of a U.S. slowdown.
Behind this decoupling is higher non U.S. domestic demand, a rise in intra regional trade and supportive macroeconomic policies in many of the world's economies, it said.
What perhaps is most significant about the Merrill report is that it sees the decoupling even with a sharp, rather than moderate, U.S. decline.
It expects U.S. growth almost to halve next year to just 1.9 percent from 3.4 percent this year, much lower than the 2007 consensus of 2.6 percent. It sees non U.S. growth dipping only half a percentage point to 5.2 percent from 5.7 percent.
Others are less sure about decoupling if the U.S. fall is hefty. PIMCO's base scenario, for example, is that the U.S. economy will have a soft landing to a range of 2.0–2.50 percent.
McCulley said a downside risk would be if the firm had miscalculated the impact of a bursting U.S. housing bubble.
Generali's Wiener, meanwhile, noted that when the U.S. economy last took a sharp dive, the impact was harsh.
When it slowed to 0.8 percent growth in 2001 from 3.7 percent a year earlier, the euro zone economy dropped to 1.5 percent from 3.3 percent, he said.
Japanese growth tumbled to 0.4 percent from 2.9 percent and emerging Europe skidded to 1.9 percent from 6.6 percent.