Much debate rages about whether we are in a seventies type inflationary environment where we will see further waves of inflation. I don’t think the comparison is valid, developed economies are in a very different place to then in terms of activity and employment levels. There is scope for inflation to tick up again and CB’s will therefore want to be certain that these prints are temporary (transitory even, remember that?) before embarking on a reduction in rates.

US Treasuries have fully unwound the back end of last year’s enthusiasm and those that bought into it late have seen some painful losses. Attention is switching to the prospect of a change of President and what that might mean for markets. The idea of Trump mark 2 and all the baffling confusion that might go with it remains startling but this is a democratic decision to be decided by many millions of clear thinking voters.

Lucidity from the ECB is rare and their intentions and timings  are possibly the least evident. The German powerhouse has skipped a beat but recent PMI’s show the Eurozone project as a whole is motoring along.

The UK has printed a technical recession but it is fair for Governor Bailey to point out that it is shallow. Whether the Bank will get its timing and scope for rate cuts right remains to be seen, but our own PMI’s appear to have picked up again strongly.

Credit markets remain healthy and spreads show remarkable stability supported by strong demand. This is evidenced in the primary market where  new issue premiums have become scarce and some are  even pricing inside existing curves, especially further out, which remains an interesting investment phenomenon but not one that we are pursuing. 
 

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