After a good start, June has carried on in a positive way for investors. Over the past week stock markets consolidated their gains, while bond yields stopped falling. Following the rapid deterioration of US manufacturing data, a number of positive data releases confirmed the ongoing optimistic disposition of consumers and the upbeat sentiment of smaller businesses and the services sector. Notably these surveys took place before President Trump ended his Mexican tariff standoff over the weekend as suddenly as he had started it.
It is somewhat encouraging that despite better news, stock markets held on to the gains they made the week before, when bad economic news led to an overwhelming belief that this would force central banks to cut rates, or at least ease monetary conditions and thereby revive the ‘central bank put’ for stock markets (see last week’s lead article).
This stabilisation of market sentiment can perhaps be seen as evidence that we are experiencing a period of fine balance. A balance between the fear that the global manufacturing slowdown will worsen through a proliferation of Trump’s trade wars (to the point of causing a global recession), and the hope that the resilience of consumer sentiment and service sector momentum will carry the economy over this precarious period of potential instability.