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Strategists warn of volatility but this is not to say stocks will see a falling level of gains over the remainder of 2021, and in fact volatility measure as shown below hit YTD lows. UBS thinks there will be bouts of volatility ahead however, and that investors will reward countries with better covid management solutions. 

Switzerland's consumer price inflation rate stood at 0.6 percent year-on-year in June 2021, unchanged from the previous month's near two-year high and slightly below market expectations of 0.7 percent, reflecting a low base year due to the pandemic and a recovery in domestic demand following the easing of restrictions. Main upward pressure came from housing and utilities, transport, and restaurants and hotels. Meanwhile, miscellaneous goods and services cost rose at a softer pace, while prices continued to fall for health, food and non-alcoholic beverages, and recreation and culture. On a monthly basis, consumer prices edged up 0.1 percent in June, following a 0.3 percent gain in May.

As we can see on the chart, there is a wide dispersion between asset price inflation and real economy inflation. Since 2009, the Nasdaq is up 900% and the S&P 500 500%, while all real economy factors such as GDP, house prices or wages have remained far under 100%. 

Bank of America ran a survey asking investors if they thought that the inflation was transitory or permanent. 72% of the surveyed investors believed that we are only experiencing a transitory inflation, while the rest thought that it was here to stay. While the Fed seems to believe in the first alternative, there are no significant certainty backing up this assumption. Portfolios will likely need to be adjusted to face a inflationary scenario and go for a more aggressive approach. 

Never had the global equity market such a high ratio compared to the world GDP. Now at 70% (meaning that the total equity market is as big as 70% of the world GDP). The last time the market reached a similar level was before the Dotcom bubble burst.