Guy Stephens, managing director at Rowan Dartington, suggests it is consumer-focused sectors that investors should be keeping a close eye on with evident wage growth and the kicker from falling oil prices, leading to something of a consumer boom.
“The consumer is waking up in the UK and this in inconsistent with almost zero interest rates and GDP over 2% – even if inflation is under control,” he says.
Inflationary consequences
“Hopefully, fears of a boom and inflation will create an appetite for interest rate normalisation such that the fear in the bond markets will subside, and it would be a negative if it didn’t happen through fear of the inflationary consequences in two years’ time.”
With sterling having hit a seven-year high last week on the back of Carney’s comments, all eyes now turn to tomorrow’s retail sales figures from the ONS. Positive data could well back up Stephens’ view, while also giving a prop up to consumer-related equities. Inflationary fears will stay on the backburner, at least until the autumn.
