US economic data has been improving lately, but Mr. Market’s no longer in a mood for celebrating. The US equity market has tumbled sharply in recent days. Meanwhile, the appetite has surged again for the safe haven of US Treasuries. Is all this just noise, or a warning signal that the recent acceleration in the US macro trend has already run its course? No one really knows the answer at this point, in part because you can still make a compelling case for both narratives. Clarity is coming, however, and perhaps as early as this week, once we see updated numbers on US payrolls for December.

Meantime, there’s a dark side to consider by way of the deteriorating trend in Europe, which is beginning to rattle sentiment in the US. In a sign of the times, consumer price inflation in the euro area turned negative last month on a year-over-year basis for the first time in five years, according to today’s monthly update from Eurostat. “Inflation will most likely fall even further in January and remain extremely low all year long,” says Evelyn Herrmann, an economist at BNP Paribas. “We expect the ECB to announce a broad-based asset-purchase program including government bonds.”

The combination of deflation and stagnant growth (or worse) for Europe overall is a toxic combination. Germany is still the exception, as today’s encouraging unemployment report reminds. But the key question is whether the Continent’s macro problems in general will pinch the US in the months ahead?

Adding to fears that more trouble lies ahead is the spike in uncertainty related to the potential for a Grexit–the possibility that Greece may leave the euro after elections later this month. While some analysts think such an event would have a minimal impact on Europe’s already stressed macro trend, that’s only a guess, and probably an overly optimistic one. In truth, a Grexit injects a huge unknown into Europe’s near-term future that’s already suffering from any number of hefty challenges. The worst-case scenario: a Grexit triggers the disintegration of the currency union. That’s a low-probability risk, for now, but in the current climate no one’s discounting the threat.

As a result, investors require a higher margin of safety and so there’s a push to lighten up on risky assets and raise allocations to Treasuries. At the same time, the crowd appears to be hedging its bets to a degree in terms of the economic assumptions for the near term. On the one hand, the benchmark 10-year Treasury yield is still falling, dipping under 2.0% yesterday (Dec. 6) for the first time since last May. Meantime, the 2-year yield, which is considered to be highly sensitive to rate expectations, is still holding on to most of its recent gains—a signal that the market is still inclined to assume that the Fed begin raising interest rates later this year. That said, a sharp decline in the 2-year yield in the days ahead would imply that rate-hike expectations are fading.

By some accounts, the future’s already clear and for all the wrong reasons.  “The economy appears to be losing steam as we head into the new year,” wrote Lindsey Piegza, an economist at Sterne Agee, in a note to clients yesterday, according to The Wall Street Journal.

It’s true that the latest business survey numbers for the US manufacturing and services sectors reflect slower rates of growth. But at this point, it’s premature to argue that the recent improvement in the US macro trend is history. The outlook is a bit more precarious vs., say, a month ago, but the hard numbers continue to paint an upbeat profile overall.

But suddenly we’re in a fluid situation and so yesterday’s analysis could change quickly. Deciding if it’s reasonable to manage expectations down for the US starts by looking at today’s private payrolls data for December via ADP’s Employment Report, due later today. In turn, these numbers will provide some guidance on what to expect for Friday’s December jobs report from the Labor Department. The consensus view expects another solid gain, which is also the forecast via my econometric modeling for today’s ADP data. But if the crowd is wrong, and we see a hefty downside surprise, it may be time to rethink the rosy assumptions for the US economy.