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Article | Global Markets Overview

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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Author

David Hoile
Senior Director, Global Head of Economics and Capital Markets Research, Willis Towers Watson

David Hoile has been the Global Head of Asset Research since 2006 – it is the economics and capital markets research department for Investments and Willis Towers Watson. His role and team cover a variety of responsibilities, including: research and forecasts for all major economies; asset market forecasts over short and long-term horizons, stress tests and appropriate financial portfolio strategy responses; and analysing the risks and opportunities from climate change and broader sustainability-related trends for economies, industries, and asset markets.


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