The market tends to be cyclical in nature and the FTSE 100 has an important weight on so-called exporters, so the direction of the pound, along with macroeconomic dynamics, are important drivers.
We have been arguing for some time that inflationary pressures were unlikely to be short-lived, partly due to the difficulty the UK is having in solving its supply-chain problems. Indeed, the focus on the green revolution has left many sectors - particularly energy - underinvested for decades. The extraordinary fiscal and monetary stimulus that followed last year's Covid crisis, combined with strong growth momentum, has resulted in significant inflationary pressures. Both our proprietary inflation ‘nowcasters' and ‘newscasters' pointed towards an elevated inflation surprise risk towards...
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