Following Powell’s dovish speech at Jackson Hole last week, markets have been re-pricing the liquidity environment. In particular, the dollar has been notably weaker, commodity prices have rallied, and equities have pushed out to new highs.
In the US that’s been most marked in the S&P500 and the NASDAQ100. The key question therefore, at this juncture, is: Have US and global equity markets entered into a ‘grind higher’ phase (with further gains likely over the next 1 – 2 weeks) or, having already rallied in recent weeks, are they now more likely to be rangebound and consolidate their gains in the near term (or even reverse their recent gains)?
The answer, as we highlight in this brief clip, depends on the ebb and flow of risk appetite. Our models measure risk appetite every day which, along with other factors, is the basis for our short term trading recommendations.
In addition to the message of various models, today’s nonfarm payrolls release will be watched closely, and is often a market moving data release. Other key data today includes the ISM Services reading for August (due at 3pm London time).