Equity markets have retained their poise. Lockdowns are, for the most part, being relaxed and while normality still looks a long way off, the move towards it is undeniable. In the UK, the economy is forecast to attain its pre pandemic peak by the middle of next year, aided greatly by forced saving delivering a consumer spending boom. The economy is now on course to deliver its fastest growth in 70 years, albeit after 2020 represented the largest contraction in 300 years.
Interest rates will not rise from the present 0.1% until the Bank of England’s Monetary Policy Committee (MPC) believes there is clear evidence the economic recovery is ‘sustainable’. Being grizzled veterans, that suggests to us the MPC is not going to lose much sleep over inflation and we fully expect its profile to loom larger on the horizon. But, that is a problem for another day. For now, optimism over economic recovery, negligible interest rates, immunisation and record house prices represent a heady brew that will keep the party going for a while yet.