Home > Macro Expectations for the Rest of 2021 – An Update

Macro Expectations for the Rest of 2021 – An Update

The global economy is preparing for the end of the pandemic, as suggested by higher oil prices and rising equity markets. A macroeconomic outlook update for the rest of the year.

The second quarter of the year is well underway and the world gets closer to the end of the COVID-19 pandemic by the day. The ongoing vaccination efforts seen around the world indicate that by the end of the year the developed economies should have left the pandemic behind.

As such, financial markets prepare for the next phase – the recovery. What are the things to focus on in the period ahead, and what are the repercussions for financial markets?


Recent data from the United States confirmed what most fear – higher inflation in the months ahead. The ISM Manufacturing revealed that prices paid rose to levels not seen since the 70s, a period dominated by rampant inflation.

Yesterday, the US Treasury Secretary Janet Yellen suggested that interest rates might need to go up sooner rather than later, triggering a prompt reaction from the equity indices. She argued that if inflation picks up, the Fed should not hesitate in lifting the federal funds rate.


The US President Joe Biden has recently announced that his administration plans to have 180 million adults vaccinated by July 4th, the US national day. On May 3rd, a little over one hundred million adults were fully vaccinated in the United States, contributing to the solid GDP growth seen in the first part of the year.

Europe follows closely. Most countries exceed 30% of the adult population that have received at least one dose. The Next Generation EU Recovery Fund will kick in in the coming months, offering the much-needed funds to lift the economy from the double-dip recession caused by the pandemic.


Worldwide equities’ prices remain elevated and will likely stay so due to fears of inflation. The earnings season in the United States showed robust earnings for corporate America, and the trend looks poised to continue.

The UK and the Japanese equity markets look particularly attractive, given the new opportunities created by Brexit as investors recalibrate their expectations. In Japan, the Bank of Japan turned the page on its yield curve control measures, offering an attractive alternative to global investors.


The price of oil hitting $66/barrel and continuing to rise is both good news and bad. On the one hand, it is good news because only one year ago it settled in negative territory. When demand drops sharply, as it did last year in March, the price follows shortly. Therefore, the rise in the price of oil suggests ongoing economic growth and recovery, a positive for the global economy.

On the other hand, higher oil prices translate into higher prices. Rising inflation may wipe out some gains, but the OPEC+ is unlikely to favour higher prices because of fears of losing market share to the US.

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