ONE WEEK HENCE
So far September has been a challenging month with most stock and bond indices posting negative returns, a trend we have only seen once so far this year, in July. What had seemed like a generally risk buoyant environment at the start of the month has taken a detour since the FOMC meeting last week. We are sure there are other influences to the current muted risk tone, such as the Eurozone’s continued economic challenges, growing airstrikes in the Middle East and revived concerns over China’s growth prospects. However, we find the confusion over the path of the Fed’s rate hike schedule the most plausible explanation for the recent weakness in risk assets, not only in the U.S., but globally. Additionally, with the exception of China’s economic woes, which were somewhat mitigated by a stronger than expected flash PMI reading this week, the other issues are generally well known and widely expected.