The US inflation result was good news this week. Investors are acutely aware that the colossal amounts of government stimulus financed by money printing are eventually going to spill over into inflation. When this happens, Central Banks will find themselves in the difficult position of choosing when to act, in the knowledge that any indication of a decision to slow down monetary support will throw economies into recession.
With this nascent threat facing economies, the release of recent US Consumer Price Inflation (CPI) on Wednesday was a relatively calming presence, confirming that Central Banks will not be forced to commit to a decision any time soon. Markets have been relatively calm towards the end of the week, in response, whilst investors digest the news.
Earnings season continues in full swing and more companies beating consensus estimates has been a theme this week. In a market where valuations are at such lofty levels, it is encouraging to see some justification for these dynamics if businesses can continue to surprise on the upside.
With vaccination programmes continuing full throttle and therefore pent up consumer demand to be drip-fed back into economies over coming months, there is reason to be optimistic about near-term business conditions. Whilst the Manager’s holdings have proven their ability to perform throughout lockdowns, those with business models which are more sensitive to economic cycles and consumer spending habits will start to benefit from a relaxation of measures.
Quote of the week
“Can you hear me? I’m here live. I’m not a cat.” Rod Ponton, Texas County Attorney.
We try to ski off-piste when it comes to finding our weekly quote, but couldn’t resist this wildly popular video of a Texas lawyer who had forgotten to remove a filter on his Zoom account, making him appear as a cat on screen. As is so often the case in these matters, the media forget to reflect on the real victims of such hijinks. Spare a thought for his poor client, sitting in the virtual dock and wondering why his fate was in the hands of a cat; feline nervous, no doubt.
Source: Sanlam Private Wealth