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.
Bearish sentiment toward China, equities and commodities is clearly justified in the wake of ongoing evidence of slowing in China, consistent deflationary signals from the crude oil and copper markets, and weak global shipping rates.
On one hand the Chinese currency debacle has tripped up sentiment, but on the other hand the markets have not shown progressive anxiety, and the shelf-life of the crisis appears fairly short.
We think that a September US rate hike is off the table because of a lack of definitive forward progression in the US jobs sector. The unending Greek saga combined with a rising Dollar has created enough headwinds to keep the Fed on the sidelines until later in the year.
The quickest and cleanest track to a major top in the Dollar was for US economic numbers to remain strong and for US economic strength to pull the Euro zone into self-propagating growth.
A number of central banks have implemented fresh easing efforts, German and European economic prospects have shown some minor improvement, and the prospect of lingering cheap energy prices is starting to offer global consumers new confidence.
The events in the second half of 2014 will do more to stimulate the global economy than all the central bank and governmental efforts combined.
While it is premature to suggest that a major bottoming of commodity prices is imminent, a combination of bearish geopolitical pressures, distinctly adverse currency market action, slack physical demand and rising physical supplies could result in a crescendo of selling and perhaps an intermediate bottoming in several markets.
It would seem like US and global equity markets have finally come to grips with the less than anticipated rate of recovery, the fear of overvaluations and a rising measure of uncertainty toward the Middle East and oil prices.
The list of positive global data flows expanded last week with improvements in UK Unemployment, China Retail Sales, and US February and March Industrial Production figures.