While the hype and equity market euphoria from the election has started to moderate, a shift in economic sentiment from inside and outside the US was already in motion, and that could allow for a “risk on” vibe until the markets get closer to the mid-December FOMC meeting.
What the Fed gave to commodity markets recently might be temporarily taken away by the “Brexit” fiasco.
An improvement in US and European manufacturing activity as well as news that the “official” Chinese PMI number climbed back into expansion territory for the first time in 8 months bodes well for a more sustainable global recovery effort.
Perhaps the moderation is the result of many markets having already priced-in anemic growth, oversupply and little threat to supply.
Just when it appeared that sentiment had reached a trough, the crude oil market dragged commodities down even further.
The US Federal Reserve appeared to be “threading the needle” with their narrative supporting a December interest rate hike, as they emphasized that the future rate path will be slow and gradual.
The impressive stock market rally so far in October highlights the ability of the marketplace to put an optimistic face on the global situation.
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.
The US economic pendulum has shifted again, with data flows generally remaining disappointing and little of any improvement in activity in the face of better weather.
From the recent action in Treasuries, stocks and physical commodities, one could come to the conclusion that the global economic condition remains suspect.