US stocks are a good example of fallibility and reflexivity at work

THE continued outperformance of stock markets around the world, led by Wall Street, has been a source of wonder, and possibly awe among many investors. In the early part of this year, it was easily explainable because there was a "reflation'' theme to bank on, one that replaced the "easy money'' push that came from zero interest rates and massive amounts of central bank money printing that started in 2009 when crooked US banks collapsed and threatened to take the global financial system down.

Reflation in turn had its origins in the US, where grandiose promises of hefty tax cuts and huge infrastructure spending by the new administration had captured Wall Street's imagination and so duly propelled equities upwards.

Six months later and tax cuts and infrastructure spending are hardly ever mentioned today as the market has come to recognise that if the administration is struggling to push through its immigration and healthcare reforms, then it will encounter an even bigger uphill battle to get its Budget approved.