Back to tranquility?

by: Han de Jong

After almost two months of rising bond yields in key markets and a month of increasing volatility and declining stock markets, calm seems to have returned as abruptly as it disappeared. Perhaps it is premature to claim that ‘the storm is over’, but it sure looks like that. The question I am left with is: ‘what really happened?’ Was this an unfortunate, inevitable but temporary bout of volatility and correction occurring at a random time? Or was it an orchestrated process in which the US Fed guided expectations concerning future monetary policy higher up to the point where they felt expectations were in line with their own plans? Economic data released last week is supportive of our long-held belief that the global economy will accelerate in the course of the remainder of the year and into 2014 with the US in the lead.