Recent communications from the Federal Reserve have insisted it will maintain current asset purchases at $120bn a month for the foreseeable future and it will not hike the Fed Funds rate until 2024. Although central banks can determine short-term interest rates, they have less control over the longer-term costs of borrowing, which are now rising. The perception of risk in financial markets has shifted from an absence of economic growth and profits to concerns over the path of interest rates and inflation.

The US Senate has recently approved a further $1.9tn 2021 fiscal stimulus, in addition to the $900bn already enacted — a combined 13% of 2020 GDP. However, some of the original $2.4tn 2020 stimulus has yet to be spent and there is also considerable pent-up consumer demand, with US household savings estimated to have risen by an incremental $1.5tn under lockdown. Even the most elevated 2021 US economic growth estimates of 7% now look conservative, leaving many to wonder whether the stimulus has been overdone.