The steep drop in many commodity market sectors could be nearing an end as a little less volatility in financial markets, a more positive tilt to the Chinese and Indian economies and less safe-haven investing could leave the US economy in good shape going forward.
Recent US economic data has shown some signs of improvement, with industrial production, housing starts and jobless claims all indicating positive progression.
The shocking election results on Tuesday caused a harsh, knee-jerk reaction in many financial and commodity markets.
The US Jobs situation continues to underwhelm along with most US economic readings, making it problematic for the Fed to hike rates in September.
Just when it appeared that the commodity markets were overbought and poised to correct, the US Fed was found to be on-hold “to at least June.”
It seemed like the initial threat to western markets was from China, but that threat has expanded with a lengthening pattern of slack US data.
The 2015 market wrap-up suggests that broad-based deflationary sentiment has resulted from a “perfect storm” during the second half of the year.
In looking ahead to the coming week, we expect additional commodity pressure going into the FOMC meeting off of a stronger dollar in anticipation of an interest rate hike.
The uneven pattern of US scheduled economic data continues, with a jump in initial jobless claims seen on the same day as ongoing jobless claims fell to their lowest level since November of 2000.
With the Fed taking a pass on hiking rates in September, a reduction in their 2016 and 2017 growth forecasts, and only minimal dissension within their ranks against a steady policy stance, it appears that they are not confident enough in the pace of US growth to make a move at this time.