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Weekly comment: Growth slow down and inflation uncertainties

Weekly podcast: Market overview

This week we discuss themes from the UKs most recent GDP data, national insurance tax as well as the rise of green parties and the focus on environmental as a political priority. Join Oli Creasey, Equity Research Analyst, Richard Carter, Head of Fixed Interest Research and Caroline Langley, Investment Director for this week’s Markets Uncut Podcast.

Market overview – Alan McIntosh, Chief Investment Strategist

Last week saw global equity markets ease back from recent strength. US shares fell in every session, although the declines over the five days were only around 2% for the broad indices. With market participants now back from holiday, it is perhaps not surprising to see a bit of profit-taking, given that most major markets are ahead by 15-20% since the beginning of the year.

The prospects for inflation remain a focal point for many. Even though many central banks are of the view that the recent rise in prices is temporary (last week the European Central Bank forecast that inflation will fall below its 2% target next year) there is a concern that inflationary pressures may persist for longer. This is partly due to ongoing supply tightness in a number of areas, coupled with higher demand as economies re-open. The hope is that bottlenecks will eventually ease and things will revert to normal, but this could take longer than expected as Covid restrictions continue, especially in developing countries where vaccination rates are low. One other concern is that inflation expectations change – in other words, consumers get used to the idea that they might have to pay more for certain things and accept it. Interestingly, both Daimler and BMW are talking about deliberately restricting the supply of high end models in future, having witnessed customers’ willingness to pay higher prices during the pandemic. Other premium goods manufacturers may do so as well. While this may work for more exclusive items however, manufacturers of more mainstream goods may struggle to pass on higher input costs to consumers. This debate looks as if it will carry on for some time!

Saturday was a day of both reflection and celebration in New York. The 20th anniversary of the 9/11 attacks was a sombre memory for many. Meanwhile two female tennis players who were not even born then captivated the world with a wonderful display of skill and attitude. Truly uplifting in these challenging times!

Written by

Alan McIntosh

Chief Investment Strategist

Oliver Creasey

Equity Research Analyst
Richard Carter

Richard Carter

Head of Fixed Interest Research

Caroline Langley

Investment Director

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