As it turned out, May’s report showed an employment gain of 559,000 – while this is below the consensus estimates, we don’t believe it is a bad result: it was only a moderate miss and it clearly highlights that employment growth is picking up.
However, as we explained last month, this ‘bad news’ is actually good news, as it should hopefully ease the markets’ recent concerns about out-of-control inflation. In fact, this data reading adds to our conviction that the current inflationary pressures will prove temporary and as such, the Fed (along with other central banks, such as the BoE, ECB and BoJ) will remain accommodative by keeping interest rates low.
As a consequence, aside from the usual everyday risks such as an escalation of geopolitical tension with China or Iran; or a new coronavirus variant, we see it hard to find a reason why global equity markets can’t make progress in the coming months.
Focusing on the week ahead, we have UK Industrial & Manufacturing data along with GDP for April; US & Chinese CPI inflation readings; the University of Michigan Consumer Expectations Index; Chinese trade data; and an ECB monetary policy meeting.
Investment Management Team