The recent developments around the US economy has been interesting.
In the past year, the US economy seemed to have a fairly steady run with things that seemed to be getting back into shape. Then the Sep US job numbers was bad- 142k created compared to the expected 200k. The numbers were lower than expected across all sectors and not surprising jobs dropped off in mining and manufacturing.
On top of that, there were downward revisions to the Jul and Aug numbers.
This all does not bode well for the global environment where the US is the only marginally bright spot. It also makes decision making difficult for the Fed as they prepare to start what possibly the loosest tightening in recent history. The obvious is that the chances for an Oct rise have been reduced.
The US markets reacted first by dropping by about 200 points and then ended with a slight rally. Following that all markets in the world rallied on Monday.
Ultimately, the global markets became "happy happy" on the possibility of a delay in interest rate raises giving risk assets another leg up.
This is a very dangerous symptom. The Fed numbers should have raised alarm bells on markets. However, the rally reaction only shows again that the markets are still fuelled and dependent on cheap money instead of moving based off fundamentals (poor numbers).
I am not a pessimist by any means. But watching Carl Icahn "Danger ahead" video, I am incline to agree that the future is bleak.
We are in a situation where fundamentals and the markets have a real gap. At some stage, reality will bite.
The question is when and how deep.
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