Weekly Market Update with Brian Ransom 12 November 2021

Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.

The market has seen a bit more volatility this week. The market started off the fall season with a month-long September pullback. Following a strong October return, the market became overbought on a short-term basis and has now started to move sideways.

In the news this week, Zillow unwound it’s house-flipping business selling 2,000 homes they were hoping to sell at a profit. Industrial conglomerate General Electric has elected to split it’s once colossal business into three independent companies. And inflation here in the US once again jumped to a new, 31 year high at 6.2%.  

Taking a closer look at that inflation reading, we can see the consumer price index took a 1 month step back before continuing it’s trek higher. The primary drivers this month appear to be increased costs in energy and food. Core CPI also ticked up 4.6% indicating that inflation pressures are now being felt in the products that have stickier price increases.

Speaking of sticky prices, we haven’t seen dramatic increases in Sticky CPI but it did tick up this month. As a reminder, Sticky CPI shown in orange, is composed of goods and services that typically hold price increases if those increases occur. Increases in Sticky CPI is more reflective of long term, sustained inflation. Thus far, the inflation spike has primarily been driven by Flexible CPI, shown in grey, where the price increases are typically temporary. On a long-term basis, the increases in Sticky CPI are small compared to the spikes seen in the 70’s and 80’s. But the small increase should not be discounted.

The increase in inflation has had an impact on the 10-year treasury bond yield, albeit a small one thus far. High levels of inflation on a sustained basis typically cause spikes in yields in the treasury yield curve which typically reverberates throughout the market and the economy. This graph, along with the CPI trajectory, are worth monitoring going forward.

For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please like, subscribe, and follow. I will be taking the next two weeks off so we’ll see you in December.