market commentary

The World In A Week – House Rules

Inflationary pressures continue to be one of the leading concerns with strong expectations that there is significant pent-up demand for goods and services as economies start to unlock from lockdowns. However, European Central Bank policymakers stated they saw no evidence of sustained inflationary pressure. Should there be strong spending activity in the coming months, we would expect supply chains to be impacted which would cause prices to rise. Alongside the strong pent-up demand, the level of consumption that is ready to be deployed should not be underestimated as consumers have seen their savings rate increase substantially and the increased demand for luxury brands has already demonstrated this. Several officials from the Federal Reserve have also commented that they expect this inflationary pressure to be temporary. We have started to see the emergence of this inflationary pressure as the US Commerce Department reported on Friday that its core personal consumption expenditure price index increased 3.1% in the year (ended 30th April). This exceeded the Federal Reserve’s 2% target and was the biggest increase in nearly three decades.

House prices in the UK rose 10.9% compared to 31st May last year according to the UK Nationwide house price index. The lifestyle shift, increased savings rate and stamp duty holiday has accelerated the demand for housing in more rural areas, where the need to be within a short commuting distance has diminished. However, the development of new houses has not accelerated at the same level and there is significant excess demand in the housing market today, causing the significant rise in prices.

US financial authorities are set to take a more active role in the regulation of the $1.5tn cryptocurrency market with overriding concerns that investors may be harmed. Cryptocurrency has been one of the leading themes over the last year with Bitcoin, one of the major coins, reaching highs of $60,000 in April before pulling back substantially to $34,750 and remains a very volatile and unstable store of value.

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete.  Unless otherwise specified all information is produced as of 1st June 2021.