I guess one of the bigger questions in the marketplace at this stage is around inflation and whether it is in fact transitory. We can expand on this by including the questions of what the impact is going to be if the US Federal Reserve eventually starts tapering or stops the monetary stimulus that they’ve been doing since the onset of the Covid-19 pandemic.
I believe that if we can answer these two questions, at least within some reasonable measure of accuracy, we should be able to position our portfolios to benefit from the coming change.
The first thing to look at is the inflation debate. Particularly US inflation, as the US economy is in large part a driver of international markets. One of the first things we are looking at is US employment numbers. At this stage there’s about 8.6m people who are unemployed (and are eligible for employment), while there is about 10.7m available jobs. Great problem to have, but still a problem. One that was created by complacency. Unemployed people are not incentivised to look for work because they’ve been receiving enormous amounts of direct monetary stimulus, or cheques in the mail, directly from government because of the economic fallout of the global lockdown caused by the pandemic.
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