May 2021 Market Commentary — Hoxton Capital Management
During the past few weeks there has been a market sell off which has been relatively unimpactful for well diversified model portfolios. There are signs that inflation may be picking up faster than expected which have heightened investor tension. The primary concern about inflation and that it may impact profit margins and force central banks to start unwinding easy monetary policies sooner than expected.
Inflation, and more specifically, the lack of it, has not been as economists would have expected in the last decade. The expected impact based on the monetary policy stimulus and ever-expanding central bank balance sheets should have led to higher inflation rates than actual data shows. The chart below shows how closely linked inflation is usually to GDP. Recently we can see that there is a disconnect which is the reason we would have expected inflation to increase more over the last few years.
Originally published at https://hoxtoncapital.com on June 2, 2021.