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Global Markets Overview: May 2021

Investments
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By David Hoile | May 26, 2021

Tracking recent asset price moves and our outlook

Our Global Outlook

Key Points for May

  • US headline CPI inflation rose to 4.2% and core CPI increased to 3.0% in the latest data prints.
  • There are many drivers of current high US inflation: i) base effects from low inflation one year ago; ii) aggressive monetary and fiscal easing; iii) a narrowing of spare economic capacity; iv) rising energy and industrial metals prices; v) an unwinding of pent-up consumer savings; and vi) supply chain squeezes due to Covid-19 restrictions. We believe a number of these forces, which are driving inflation over the short-term, are most likely to prove transient and are likely to abate over 2022.
  • However, we expect high inflation volatility in different sectors as the US economy moves to its post-pandemic “new normal.”
  • US President Biden announced an additional fiscal stimulus plan of $4tn to be spent over 10 years. The American Jobs Plan and American Rescue Plan are largely aimed at improving the nation’s infrastructure, technology, competitiveness, and social security. These spending plans will mark an important shift in fiscal policy for the US, in terms of both magnitude and their sectoral and societal impacts.
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Senior Director, Investments

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