Jefferies analyst Christopher Wood, in his stock market commentary "Greed and Fear" said in a funny kind of way, the better the numbers these companies report, the more it is a sign of their control of the marketplace from an anti-trust and other regulatory standpoints. FAANG refers to leading tech stocks Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google).

"Action on the anti-trust front is surely coming sooner or later, just as it has now arrived in China. On top of this, there is the obvious risk of the law of large numbers as regards maintaining such growth rates. Meanwhile Greed & Fear continues to prefer cyclical stocks with the obvious pair trade, in the run up to the inflation scare, that of being long energy and short tech," Wood said.

"For now, Greed & Fear's conviction remains that the financial markets are heading for the biggest inflation scare since the early 1980s, which is why equity fund managers need to remain razor focused on inflation expectations which are likely to be the lead indicator of the timing of any potential tapering scare.

"For such a surge in inflation expectations will be the trigger for the markets to stress test the Fed's metal. The US 5-year 5-year forward inflation expectation rate rose to 2.28 per cent last Thursday, the highest level since October 2018, and is now 2.26 per cent," Wood said.

If loan growth has not picked up, bank deposits in the US have continued to surge as a result, in large part, of the increase in transfer payments. The four major banks' total deposits rose by 15.4 per cent YoY in 1Q21 and are up 28 per cent since the end of 2019. The Fed's flow of funds data shows that the increase in household deposits in 2020 accounted for 52 per cent of the increase in total deposits, the commentary said.

"Still Greed & Fear's base case remains that a major inflation scare is coming in America triggered by pent up demand," Wood added.

Another reminder of the extent to which American households have been net financial beneficiaries of the pandemic, and therefore the related pent up demand potential, came with March data released at the end of last week. Nominal disposable personal income surged by a record 32 per cent YoY reflecting the arrival of more stimulus cheques while the personal savings rate soared to 27.6 per cent.

As a consequence, the net result is that US households have now lost $509 billion in personal income in the 13 months since the arrival of Covid and related lockdowns and received $1.77 tn more in transfer payments than the pre-Covid levels.

One issue raised by this transfer payment windfall is whether there will be an incentive to return to work. On this point, Greed & Fear referred last week to the growing difficulty reported by small businesses in America finding labour.

Thus, the National Federation of Independent Business survey released last month found that a record 42 per cent of small business owners reported they could not fill job openings, and this data series goes back to 1974.

Wood said it has also been estimated that 42 per cent of unemployed Americans currently make more money staying at home with the current level of unemployment benefit. The unemployed are getting an extra Covid-related $300/week from the federal government in addition to an average $320 benefit provided by the states, though it should be noted that the extra Fed top up is meant to expire on September 6.