The Cambridge Weekly – 4th May 2021

Doubling of earnings leaves markets cold

After the previous week’s lull in global equity markets, most regions recovered their previous highs last week, albeit in somewhat lacklustre trading patterns. Just as there were several reasons why markets were in a bad mood the previous week, there are many reasons for the more positive outlook last week. Those who were most fearful of geopolitical risks will have sounded a sigh of relief when Russia backed down from its threatening build-up of army forces on the Ukraine border, and the relationship between China and the US, appeared more agreeable than contentious at the (digital) climate change summit.

‘Sleepy Joe’ wakes up the US economy

Things are looking good for President Biden as his hundredth day in office passes. The US economy grew by a very healthy annualised 6.4% during the first quarter. While overall growth was a little less than expected, personal consumption accelerated more than 10%. The reason this is not proportionally reflected in GDP growth is because inventories had to be drawn down to satisfy demand amid the problems in supply chains which knocked growth back. As inventories are replenished this should translate into stronger growth for the rest of this year.

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