The September growth play picked up speed at the end of the week, as markets liked stronger than expected US business investment data from August (taking out the volatile transportation sector, durable goods orders were solid, suggesting a good third quarter) and news coming out of Germany (growth appears to have kept up, based on a reliable business sentiment indicator).

But, going forward, things are in fact complicated. Uncertainty and concern over the outlook for the U.S. economy persists, although fears of crisis have subsided for the time being. With weaker economic news earlier in the week and the Fed taking a large step in the easing direction based on worries about weak growth and below target inflation, demand for Treasuries picked up earlier in the week and the yield on the benchmark 10-year declined. With today’s good economic news, the 10-year bond reversed course a little and traders went to equity markets here and in Europe. Demand for gold – considered a safe haven investment by some – remains buoyant.  Many cross-currents are also shaping the European outlook. Currency movements are also being driven by policy steps involving the Bank of Japan (which had intervened to dampen the yen’s rise) and the US and China (Congress is expected to raise its currency manipulation concerns next week, in some form).

For the economy in the 4th quarter and early next year, uncertainty over tax policy is becoming a problem.  Households and businesses, trying to plan, do not know whether what their tax bill will be, starting January 1st. This uncertainty appears to be starting to dampen economic activity now. With the recovery struggling, the last thing we need is avoidable policy uncertainty.