This was the month when inflation fears were stoked anew as both US and UK CPI figures jumped.

The US figure was the highest recorded since 2008 while the UK was back up to March 2020 levels (it will surely reach the Bank’s 2% target level this year). Central bankers insist that this is a passing phenomenon. As we have said on a number of occasions, this year’s figures will be lumpy, we have a lot of distortion to work through (it was April last year that oil prices went negative), the question remains as to what happens after that. The central banks have a point, the current revival will likely fade, but we expect a stronger economic recovery than many and a number of the deflationary effects of the previous ten years (forced retrenchment by the banks for example) have gone. So I suspect that inflation will not fade right back and will need to be taken more seriously - caveat emptor, buyers of longer-duration bonds.

The VIX Index of US market volatility jumped back up into the 20s again after the calmer period in April. The NASDAQ struggled, down around 5% over this period, as a number of high profile names were hit, Tesla fell 17%, but the established names also fell back Amazon, Apple and Microsoft were all down by around 6%. The broader market indices were steadier, the S&P 500 fell by less than 1%, as consumer staples, banks and big oil picked-up again. UK and European markets were steadier overall, most being up a per cent or so.

Bond yields moved surprisingly little overall, probably held back by the poor US employment data, the US ten-year picked-up to 1.62% (still below the end-March highs). The UK ten-year is at 82bp having flirted with 90bp as the Bank’s tone edged more hawkish as it upgraded inflation, GDP and employment forecasts while tapering the scale of its current programme of asset purchases. German and Swiss ten-year rates are the only (European) sovereigns remaining with negative yields.

The US dollar slipped further again and is now back down to the January lows, in turn, this led to gains for sterling and the euro. The price of gold picked-up by around 6%, possibly encouraged by those inflation figures, while the oil price rose modestly, concerned (!) by the possibility of a rapprochement with Iran. I hesitate to mention Bitcoin (my views are in line with Charlie Munger’s) but its volatility has been extraordinary to behold, and I can’t get away from the feeling that I have seen that price action before.

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