Market Briefing

While the US economy is showing the signs of peaking, the majority of the market sentiment indicators have already reached their previous peaks. What these indicators tell us is that V shape recovery have finally completed its current cycle. But this time recovery  took longer time  than preceding recessions due to the severity and magnitude of the financial crisis.

Main reason behind the recovery in the U.S. economy was the return of the household demand into the markets thanks to increasing employment. The major drive behind the employment boost was the boom in the shale oil industry. Oil industry has created 1 million additional jobs during last five years.

Now maturing recovery has two challenges that puts currently extended financial markets in jeopardy. One is decreasing oil prices which will effect employment picture adversely, the other is FED’s interest rate guidance conflicting with rising financial instability in the Euro zone, particularly following the Greek elections, combined with the global deflationary trends.

In brief, I am not suggesting that a recession is imminent, but I am reminding that the risk to investors has risen over the short term. Level of the  over confidence among the market participants warrants this cautious approach.