“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute” William Feather

An eventful week for bond and equity markets post the statement from the Federal Reserve’s monthly meeting. They were not the only central bank this week to meet, as the Bank of England and the Bank of Japan likewise held their monthly meetings. The message was a similar one from each, the global economy is on an uncertain path to recovery, and whilst that remains monetary stimulus will remain supportive. The pandemic, nearly a year after the first lockdowns were announced, continues to dominate news services. Many parts of Europe are being locked down again as their vaccine program remains an issue, leading to continued tensions between Britain and Europe oversupply and demand.

Global bonds sold off further post the Fed statement as the yield curve steepened, the 10 yield on the ten year US Treasury bond now trades at 1.72%, above the current rate of inflation, as the Fed announced they once again have increased their expectations for economic growth this year. Technology shares have been the biggest victim of the rise in bond yields, giving up all the gains from the start of the year. Overall US equities have weathered a dramatic rise in US bond yields pretty well, global equities remain modestly higher from the start of the year. Valuation concerns for US equities may well continue if longer-dated US yields continue to rise.

Global equity sentiment indicators remain in greed territory, aside from oil and Bitcoins, global equities have provided the best returns so far this year. Government bonds are down 5% year to date, and Gold almost 10%. The dollar is marginally higher this year. Global equities have seen almost 350 billion dollars of investment this year, after another record week of inflows. With the current strength of macro data, freight rates up nearly 100 pct this year, US house prices up nearly 20%, the latest Philly Fed survey reported manufacturing highest since March 1973, inflationary concerns will persist.

Looking to the week ahead, flash Purchasing Manager Surveys from around the globe will give further insights into the current outlook for the global economy. More central banks meet this week, the most important of which is the Bank of China. Some emerging economies, Brazil as an example,  have started to tighten monetary policy in contrast to the more developed ones. There has been some rhetoric from China regarding doing the same there to control the growth in debt. For the UK average earnings, the employment rate and the latest inflation data will make headlines.