Weekly Market Commentary 04/14/2017

Since the election the financial markets have downplayed the disappointing trends in the “hard data” and hitched their fortunes to the upbeat messages conveyed in the soft data, most notably in the surveys of consumers, business leaders, purchasing managers, small business owners and security analysts. Stock prices have roared ahead, long-term interest rates are higher and the dollar is up, all signs that investors and currency traders expect a strengthening U.S economy. However, this so-called reflation (or Trump) trade may have met its inflection point. As we have repeatedly warned, the discrepancy between hard and soft data can not last indefinitely; at some point, actual performance has to validate market expectations or the patience of market participants would wear thin.