USA leads the reopening

Pent-up demand and a reopening that appears increasingly close are increasing inflationary expectations.

For the month as a whole, the S&P 500 Index rose by 5.3 per cent measured in USD, while the Stoxx 600 Index increased by 2.4 per cent measured in EUR and the Nordic VINX Index climbed 3.0 per cent measured in NOK. The Oslo Stock Exchange (OSEBX) saw an upturn of 1.7 per cent during the same period.

Infection rate is dropping

Although the reopening is still on hold in Europe, we see clear signs that the infection rate is dropping. Many European countries, including in the Nordic region, have significantly increased their vaccination rate. In several of these countries, almost 3 per cent of the population is being vaccinated each week. At the same time, there are severe fresh outbreaks of the virus in India and Japan. However, the USA is leading the reopening, and its high vaccination rate has meant that many states have already removed several restrictions.

Full bank accounts

In the USA, the unemployed have been compensated by direct transfers from the state. This, combined with less money being spent on activities due to the restrictions, means people have large savings. Now that the service sector is reopening, this money is ready to be spent. A sharp increase in demand is therefore expected going forward.

Temporary inflation?

The strong pent-up demand and the rise in commodity prices are leading to increased inflationary expectations. The question now is whether they will have a long-lasting effect on the inflation rate. The central banks’ main hypothesis is that this is temporary since wage growth also has to be long-lasting in order for the inflation rate to remain high. Should this hypothesis prove to be wrong, the monetary policy may have to be tightened earlier than expected.

The road ahead …

The MSCI World Index set a new all-time high record in April, driven by good macro figures. The prospect of a reopening of the eurozone in the summer also leads to growth expectations. In total, this indicates that the economic situation and company earnings related to shares will continue to improve steadily.

My mother had a saying: 'Kamala, you may be the first to do many things, but make sure you're not the last.'

Kamala Harris