The US central bank sets the global cost of capital. Since its mid September meeting its message had been read as hawkish.
Analysis
Markets were pricing two hikes by year end. But John Williams and Philip Jefferson indicated there was no urgency, and the data bore them out: PCE inflation came in below expectations and job creation was far weaker. Investors now expect a hold at the end of October meeting.
Opportunity
The opportunity is relief for duration sensitive assets: technology, bonds, precious metals. The risk is that inflation remains the constraint and the central bank stays hostage to conflicting data.
Investor outlook
Positive but fragile short term outlook for risk assets. Data dependence remains at its maximum.
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