The return of inflation has taken a lot of people by surprise, although it should not have done. Worryingly, even central banks have acted quite surprised by the abrupt rise in prices, when they should have expected it.
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Buy in May and go away?
It looks like the old saying “Sell in May and go away” has just been turned on its head. After cratering for seven weeks, the S&P 500 index ended last week up 6.6%
Continue readingWatch commercial banks’ interest rates for clues on the future
While all eyes are on what central banks will do with interest rates, consumers and investors alike should really worry about what commercial banks will do.
Continue readingEuropean assets: overbought or oversold?
Will 2022 be the year when the tide goes out in Europe’s financial markets? Many commentators now say it will, and point to the large sums of cash that have gone into stocks, bonds and other financial assets in the past.
Continue readingFour reasons why the stockmarket rally is not over
Those who worry that the extraordinary stock market rally will come to an end in 2022 may be worrying too soon: equities could still power ahead, and particularly so in Europe.
Continue readingHousing wealth soars while productivity lags
A century ago, the roaring ’20s were a time of hedonistic excess. After the horror of World War I, people wanted to rebuild, but also to forget. Wealth increased, and so did prices.
While we like to think we are smarter, or at least more knowledgeable than 100 years ago, there are worrying similarities between the two periods. If anything, the excesses this time around are much greater.
Continue readingConsumer price inflation or house price inflation? UK has to choose
The perfect storm is brewing for UK inflation. Boris Johnson and his government will not admit it, but their choice of a hard Brexit will exacerbate price rises, on top of the effects of the Covid-19 pandemic.
This could put the Bank of England in the unenviable position of having to choose which bubble to burst: consumer prices, or house prices.
Continue readingECB pays lip service to worries about inflating a housing bubble
The European Central Bank (ECB) raised its inflation target last week, at the same time going to great lengths to try to persuade people that it did not.
In the process, the central bank also stated that it will find a way to deal with an issue that is increasingly pressing: that of runaway house price inflation.
Continue readingInvestors fear inflation but run to it
Recent capital flows highlight a paradox: investors are afraid of inflation, but seem to have increased their allocation to just the assets that would do worst out of it.
Continue readingInflation is not transitory after all
“Transitory” is the preferred word to describe inflation these days. Central bankers love it, because it means they can continue their easy money policies. Investors love it, because it means the markets’ party goes on.
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