🛏Inflation Fear🧸

Reach for the stars is perhaps the last time investors hope for in the upcoming November inflation report. It is a tense moment. After all, Wall Street and Washington are worried about Nov’s figure pointing to the fastest annual rate for many decades.r

🎙The Expectation

Economists are generally looking for a 0.7% month over month increase in Consumer Price Index. As a result, the yearly rate increase is expected to be 6.7%, marking the fastest growth ever since the 1980s. 

💣Uncle Powell hands are Tied

If the figures come close to the expected level, then we are likely to see the Fed increase in the pace of scaling down the bond purchase. 

Hitting above expectation could send the market into turmoil as we are likely to see a faster rate increase, with some expecting in March. Although we had a more hawkish Uncle Powell recently, it provides investors with the time to adjust to the expectation of a tighter monetary situation. 

🗽President Biden Social Spending

Higher CPI reading is likely to complicate Biden’s trillion-dollar social spending plan. Sen Machin had been less inclined to vote for the bill partly due to the worry of inflation. Nonetheless, Senate Majority Leader Schumer had stated his desire to have the legislation complete before Christmas. So from now till then, the November inflation data is the only report of great significance. 

Economists generally do not expect the social spending plan to impact the inflation figure profoundly. This considers the more extended period of spending and the type of investment from the bill. Nonetheless, Machin is not willing to vote for a bill that continues to dash markets with streams of cash. 

🪜Challenges Ahead

Equity markets certainly prefer a milder figure. Despite some recovery of issues relating to supply chain constraints, Delta variant continues to complicate return to work momentum, more so with the uprising of Omicron, which could add fuel to inflation when consumers demand keeps coming at an elevated level. 

This volatile period poses challenging period to our portfolio returns and we remain conservative with tiny accumulation in each episode of pull back. 

Cheers, 

Pika Nat