Markets have priced in rainbows but no rain

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There is a lot of sunshine and rainbows in economic stats recently:

Morgan Stanley’s leading trade indicator:

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Consumer confidence is generally up in the US:

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And in Europe:

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With US construction still strong:

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The dark clouds? Not many. Rising interest rates and a rising US dollar choking off any recovery are the main ones, but there have been a few employment stat wobbles in the last week. It’s worth remembering though that employment is usually a lagging indicator, so this could “wash through” as higher confidence is reflected in actual spending:

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Also worth noting on the employment front that the situation in Italy is getting worse again. Poor employment conditions in Italy probably means more votes for Five Star which wants to leave the Euro:

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It is hard to be too bearish in the face of these stats – but therein lies the key issue: markets have priced a lot of good news in already – have they priced too much?

Next week we will publish a deeper look at that issue.

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