Weekly Market Summary.

The world’s most important central bank, the Fed, has been this week’s main focus as policymakers met to decide US monetary policy.

Yesterday’s US CPI inflation data was this week’s focal point – and as we forecasted in our last market update, although the inflation reading did show a big year-on-year increase, thankfully, as we hoped, it turned out to be much ado about nothing as most of the major global equity markets ended the week slightly higher.

Thankfully it was a holiday-shortened week as equity markets lacked direction as all eyes were focused on today’s (Friday 4 June 2021) US employment data.

This week’s equity market action was surprisingly dull, despite the volume of US economic data announcements.

The tug of war between an economic reopening and recovery on one side and inflationary worries on the other meant that it was not only a very intense and exhausting week, but at the same time, a whole-lot-of-nothing week, as global equity markets ended the week broadly flat.

There has only been one theme in play this week: inflation – thanks to Wednesday’s (12 May 2021) 4.2% US CPI inflation reading.

If it was worth us stressing once, it is worth us repeating and repeating it ad nauseum: an increase interest rates is many years away.

It has been an interesting week: recent robust economic data allowed Jay Powell, the Fed Chair (the US central bank), to talk optimistically about the economic outlook, while at the same time effectively reminding the market of the famous mantra ‘don’t fight the Fed’, as he repeated it was far too early to consider tighter monetary policy.

Better-than-expected economic data failed to push equity markets higher this week thanks to a resurgence in coronavirus cases (mainly due to India) coupled with reports that Joe Biden is considering plans to almost double the capital gains tax rate to 39.6%.

The FTSE-100 ended the week above the 7,000 level – a level not seen since 26 February 2020 and a far cry from the sub-5,000 level it fell to in those dark and uncertain times last March.