Over the autumn, stock markets rallied strongly, bond yields rose, and traders scaled back their expectations of further policy easing by central banks.
These moves were driven by growing optimism that the slowdown in the global economy had reached a trough and that activity would strengthen next year.
There has been some abatement of the risks facing the global economy, with progress being made on resolving the US-China trade war, as well as on securing an orderly UK departure from the EU.
It is also hoped that the easing of monetary policy and marked improvement in conditions in financial markets during 2019 will help boost activity next year.
There have been tentative signs of improvement in some leading activity indicators.
The slowdown in global growth has been led by contracting manufacturing activity and falling international trade volumes.
However, the global manufacturing purchasing managers’ index (PMI) rose for the third consecutive month in October, reaching 49.8, just below the 50 level that would signal renewed expansion in the sector.
Meanwhile, the new export orders component of the global composite PMI posted a solid rise in October.
The latest survey data show a further rise in the manufacturing PMI in the US and eurozone in November.
Meantime, global trade volumes picked up by 0.5% in the third quarter of 2019, having declined in the previous three quarters.
More recently, though, financial markets have turned more cautious about the economic outlook.
Bond yields have fallen in the past couple of weeks, while the rally in equity markets has run out of steam, with the notable exception of the US.
Markets also expect that there will be at least one further rate cut from the US Federal Reserve next year.
Getting a US-China trade deal over the line is proving challenging, especially against the difficult political backdrop in Hong Kong.
It is also becoming clear that a difficult year of EU-UK trade negotiations lies ahead in 2020, even if there is an orderly Brexit at the end of January.
UK data also continue to disappoint, with weak PMI figures for November.
Thus, markets think that the Bank of England will cut rates next year, with a 15-basis-point reduction currently priced into futures contracts.
The recent, more cautious, tone from markets suggests that we could be in for a very quiet final month to the year. Traders and investors are also likely to want to lock in profits and avoid further risk-taking, after a strong year in markets.
Volatility has already fallen to very low levels on stock markets and the main currency pairs seem likely to remain range-bound.
Markets, though, will still be keeping a close eye on leading indicators to see, if, indeed, the world economy is at a turning point.
The Organisation for Economic Co-Operation and Development (OECD) does not seem to think so, with a downbeat assessment of the prospects for the global economy in its latest economic update.
The OECD warns that the cyclical downturn in the world economy is broad-based and becoming entrenched, while downside risks have intensified.
It is forecasting that a sustained period of subdued growth lies ahead, with no pick-up in the global economy in 2020 or 2021.
No wonder markets have turned a bit more cautious recently on the economic outlook.
- Oliver Mangan is chief economist at AIB