Multi-asset markets outlook

To say there has been an overwhelming theme dominating the financial markets would be overdoing things: the markets have shown a limited to no sense of direction during the past month, so ‘domination’ has been absent. Having said that, there are two themes that seem to be on the mind of most market participants. The first is the failure of the ‘deal maker’ Trump to make a deal with his own Republican party, and thereby leaving Obamacare intact. The economic impact may be limited, but it has markets pondering what the bigger implications for the reflation story may be.

The second theme is the soft/hard data discussion: the mismatch between the very positive producer and consumer sentiment data seen, and the so-called harder production and consumption data. Risky assets have rallied on the back of the positive sentiment data, but as soon as this fails to materialize in turnover or earnings data, it means that risky markets look vulnerable. We are inclined to think that positive sentiment data will indeed have positive real effects as well, although the current lead-lag seems to be taking (a lot?) longer than normal.