After the record setting highs of the US markets last week, the futures look to be closing the gap to start this week on a positive note as well. This has the VIX index back near multi year lows. Couple this with a light week in terms of US economic news and you have the markets at the whims of politics. With more news sure to come out from the repeal of Obamacare, and talks of an ambitious tax plan to follow, it will be interesting to get the market's likelihood of a meaningful deal.

​The lack of greater economic news will provide a clearer link to the talks of a revised tax deal and the removal of Obamacare legislation to how much the market is still pricing assets to a deal. Political exhaustion will come at some point, but as seen in the VIX it looks like strong economic news may take over as a driver in the near term. one thing that investors can be sure of is that low volatility makes bets on larger swings in asset prices less expensive to hedge against. Not a bad idea given the conditions.

Crude oil has been struggling to maintain its gains since the start of the year, nearing the lows that it has seen in early March. The rise we have seen in oil was from the OPEC members (and others) agreeing to output cuts to shore up prices. This has faded over time as inventory levels started to creep back up, but not all of this is to blame on the Cartels.

​The US onshore producers have increased production with the rise in oil prices making many of their fields profitable again. This spike in production can stop almost as easy as it started. Longer term, many oil companies are locking in contracts for oil, sacrificing price for stable cash flows. Should this trend continue it could be the start of major oil companies starting to put more of their revenues into longer term offshore projects and exploration.

​This could be a good thing for ETFs like the SPDR S&P Oil & Gas Exploration & Production (XOP), which have been underperforming along with the oil market. As oil contracts get locked in prices and we see a stabilization in prices from a lack of investing in replacement wells, the yield on this ETF could start to justify higher prices in the future.

On Tuesday the Reserve Bank of Australia (RBA) will meet for an interest rate decision and have a meeting. Many are expecting no change in policy and in light of some recent economic numbers, some investors are expecting the debate within the bank to start to hinge towards the possibility of rate hikes and less away from the timing of the next cut. The shift from a loosening to tightening policy will depend more on the outlooks from China and their needs for commodities than domestic growth in the country.

​China will come out with their manufacturing numbers early Tuesday followed by Europe and the UK (the US numbers are today). Watchin these numbers, coupled with Australia's reliance on the commodity sector growth (and inflation) it would be wise to track these numbers, especially in the APAC region.

The RBA mentioning in their meeting about the recent rise in inflation could spur the Aussie dollar to strengthen back down to levels seen after the US elections when the reflation trade was in full swing. The anticipation of higher interest rates would make the currency more attractive and could help stem the growth in debt levels that are keeping many investors on the sidelines in terms of longer term investment in the country.