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Transitory inflation spike?

15 June 2021

In this week’s Market Pulse, Investment Analyst Niamh O’Leary revisits the topic of inflation as the US Federal Reserve begins its monthly meeting this week. She also discusses the Investment Team’s recent Asset Allocation meeting key talking points.

  • Equity and fixed income markets were better over the week despite a strong CPI figure from the US. The reaction from the bond markets is the most surprising. Not only have we not seen them sell off they have actually strengthened as we saw data releases in the US that would put you on guard about increased inflationary pressure.
  • The ECB held its Council meeting last week and as expected, it will continue with elevated buying for the next three months but no guidance as to what happens then. ECB President Lagarde reiterated that it is too early to debate end of PEPP and reiterated the importance of keeping policy support in place while the economy recovers.
  • The US is recovering despite supply issues, some of which we expect to be temporary but others might be stickier and so we are watching closely.
  • Recently we have seen a switch back to mid-cycle trends, a bit of life in the Healthcare and IT sectors, and a resurgence in belief in the re-opening theme.
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