Stocks moved lower this week on the heels of hotter-than-expected inflation data for October. The Consumer Prices Index (CPI) spiked by 6.2% year-over-year, marking the largest annual increase in CPI since 1990. In addition, the producer price index (PPI) rose by an annualized rate of 8.6% (6.8% ex-food and energy) as reported on Tuesday. Against a backdrop of solid demand, businesses have been raising prices for consumer goods and services as supply chain bottlenecks and a shortage of qualified workers persist. Higher prices for energy, shelter, food, and vehicles fueled the supercharged reading in October and indicated inflation is broadening out beyond categories associated with reopening (Bloomberg). This data comes as the Federal Reserve recently began talking about normalizing monetary policing, beginning with tapering asset purchases later this month. Inflation will remain at the forefront of concerns for investors as the economy continues to recover, as investors monitor the potential for increased interest rates and pressure on asset valuations. In Washington, last week was a very important one in getting America back on a post-pandemic recovery track. The bipartisan infrastructure bill finally passed the House of Representatives and headed to the President for his signature. While it is commonly referred to as the “trillion-dollar” infrastructure bill, according to the Congressional Budget Office it would only add about $256 billion to cumulative deficits over the next 10 years (JP Morgan). Interest rates moved higher this week, with the yield on the 10-year Treasury trading around 1.48% on Wednesday.
Source: GSAM, Daily Upside, JPM, Factor Investor
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