Inflation fears begin to take hold
The topic of the month in May was inflation. Anecdotal evidence and hard data showed that inflation was picking up as economies re-opened. The main argument was about how high it would go and whether it was a temporary phenomenon or something more lasting. So far, the Federal Reserve is sticking to the line that it expects it to be transitory and that its main priority is to ensure economic recovery and higher employment. It seems that the bond market agrees. The US 10 Year Treasury yield fell slightly over the month and at its current 1.5 per cent, is some way short of the 2021 high of 1.74 per cent on 31 March. On the other hand, the gold price suggests that some investors are less optimistic and are buying insurance. The gold price rose 7 per cent to its highest level since early January.
Equity markets made further progress with Continental European markets especially, in fine fettle. The CAC 40 gained 3.4 per cent, the Italian MIB, 2.9 per cent and the DAX, 2.5 per cent. The Nikkei 225 was up 1.2 per cent, but in the US, while the Dow Jones at 1.9 per cent and the S&P 500 0.5 per cent were in positive territory, the tech-heavy Nasdaq composite was down 1.5 per cent. In the UK, the FTSE 100 crept above 7000 for the first time since March last year. The All-Share was up 1.1 per cent, taking the gain this year to 10.9 per cent.