The storm passes

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Trump claims victory over his demands regarding Greenland, as he backs away from his tariff threats. Equity markets showed a sigh of relief and recovered most of the losses from earlier in the week. The array of US economic data, including GDP estimates, inflation, and employment reports released on Thursday, came in pretty much as expected. We talked a lot about sentiment, and many indicators suggest investor sentiment is currently in greed territory.

The sell-off at the start of the week has done little to dent that enthusiasm. The investment community continues to focus on a favourable growth outlook, robust earnings, and structural trends that should sustain global equities. We would have expected the AAII retail investor survey to reflect the events of earlier in the week, and it does appear to have taken a little wind out of their sails, but the index continues to report that retail investors are bullish. The Vix fear index has sunk right back to the lows of the start of the year. Later today, we get the results of the monthly flash PMI report from around the globe.

Coming into next week, we have the first Fed meeting of the year. The general consensus is that there will be no change from the Fed, a decision which is likely to draw the disapproval of President Trump. Soon, we will get to hear the replacement for Mr Powell. One has to wonder if some of those who fancied the job are having 2nd thoughts. The latest institution to feel the wrath of the President is JPMorgan, after claims that it was de-banked by the institution, suing the Bank for $5bn. This news appears to have coincided with Dimon’s interjection into the row between Trump and Powell. In what appeared to be a comment directed at the President, Mr Dimon expressed the view  that “anything that chips away at [the Fed’s independence] is not a good idea.”

Aside from the Fed meeting, earnings season will continue in full flow; there is not much US economic data. There is further employment data at the end of the week, and the Fed will have met by then.