Spring is here and the economy is blossoming, says Randall Forsyth in Barron’s. Mass vaccination and “trillions of dollars of fiscal and monetary Miracle-Gro” have nourished the economy’s green shoots. US GDP is expanding at a 6% annual rate; jobs growth has surpassed expectations. Retail sales rose by 9.8% month-on-month in March as Americans spent their stimulus cheques.
Signs of a global recovery are especially clear in manufacturing, says Jim O’Neill in Project Syndicate. The US manufacturing purchasing managers index (PMI) has recorded its highest reading since 1983. The eurozone equivalent hit the highest level in the bloc’s 22-year history, while the UK manufacturing PMI rose to a ten-year high.
Global markets have been basking in the recovery. America’s S&P 500 and Dow indices both finished last week at record highs following four straight weeks of gains. The pan-European Stoxx 600 hit a new record peak on Monday morning. The FTSE 100 has eclipsed 7,000 (see page 5).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Markets did fall back slightly at the beginning of this week, report Naomi Rovnick and Colby Smith in the Financial Times. A worsening Covid-19 situation in places such as India and Brazil has raised doubts about whether the global recovery is really secure. Yuko Takano of Newton Investment Management adds that markets have now priced in all the good news about vaccines and stimulus. They need “something new to look forward to”.
The first signs of price rises have also started to emerge. Annual US inflation hit 2.6% in March, a significant rise from February’s reading of 1.7%. You would have bet that bond markets would panic at the news, but in the event they shrugged, says John Authers on Bloomberg. The inflation spike was driven by the recovery in oil prices, which plunged below zero one year ago this week. Stripping out oil and food, “core” inflation remains under control for now. The consensus is that the US is heading for inflation a little over target over the next five years, but investors are not yet betting on an outright “regime shift” that takes us back to the 1970s.
The S&P 500 is up by 87% since its nadir in March last year and the bull market has never looked healthier, says Caitlin McCabe in The Wall Street Journal. The initial rebound was driven by technology stocks. Yet this year other sectors have risen. A “broader” market rally usually has further to run than one dependent on a few stocks.
How much longer?
With interest rates pinned to the floor and central bankers still gorging themselves on bonds, there is little prospect of markets rolling over, says Ambrose Evans-Pritchard in The Daily Telegraph. There are a few signs of cooling sentiment: appetite for newly floated businesses is not what it was, as shown by the Deliveroo flop. Geopolitical risks are worsening (see page 14). Inflation is another worry. Yet for now, none of that is likely to put a dent in the bull market. “Great equity booms” can go on “for a year or 18 months longer than a nervous rationalist believes possible.”
Three fund ideas for your stocks and shares ISA
If you have yet to maximise this year’s £20,000 ISA allowance, here are some funds worth considering.
By Katie Williams Published
Holiday scams warning: £12.3m stolen by fraudsters
Action Fraud has revealed thousands of people were hit by holiday scams in 2023. Here's how to protect yourself from fraud.
By Henry Sandercock Published
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
Magic mushrooms — an investment boom or doom?
Investing in these promising medical developments might see you embark on the trip of a lifetime.
By Bruce Packard Published
What pension providers don't tell you about your retirement money
Check the small print from your pension provider or risk losing thousands.
By Merryn Somerset Webb Published
Should you invest in sector funds?
Sector funds can be a useful way to fine-tune a portfolio or track a theme, but check what the index holds.
By Cris Sholto Heaton Published
Three high-quality global companies for growth
James Harries, a senior fund manager at STS Global Income & Growth Trust highlights three favourites.
By James Harries Published
Four high-quality stocks set for decades of dividend and earnings growth
Charles Luke, an investment manager for Murray Income Trust, highlights four favourite high-quality stocks.
By Charles Luke Published
Humana sees healthy growth in US healthcare
Humana is a major player in the American market and the stock’s valuation looks reasonable.
By Stephen Connolly Published