Inflation Surges to Highest Level in 30 Years

Market Data as of Week Ending: 11/12/2021 unless noted otherwise


U.S. stock prices were mixed as most of the major indexes finished the week with small losses. The decline in investor sentiment was most likely caused by the higher-than-expected inflation data. More than 90% of companies in the S&P 500 have reported third quarter earnings and the growth rate is expected to be above 39%, despite supply and inflation pressures that have constrained growth. The value style factor outperformed growth while size factors were mixed. Nearly half of the major economic sectors were positive, led by notable gains in the materials sector followed by small gains in the health care and industrials sectors. Stocks in the consumer discretionary and energy sectors lagged and were both down more than 1% for the week. Developed foreign stocks in Europe and Asia narrowly underperformed U.S. stocks while Emerging Market stocks delivered a solid gain for the week and outperformed both U.S. and developed foreign stocks.


U.S. Treasury yields rose as the 10-year ended the week at 1.56%. The Labor Department reported that inflation increased in October by 6.2%, from the same period one year ago, which is the highest level in more than 30 years. All segments of the bond market were in negative territory. Long duration corporate bonds declined the most and high yield corporate bonds outperformed. Investment grade and high yield corporate bonds ended the week with yields higher at 2.3% and 4.8%, respectively.

Macroeconomic Data

Economic data released during the week was mixed and headlined by the U.S. Labor Department’s inflation data for the month of October. Consensus expectations were an increase of 0.6% for the month, but the figure came in at 0.9% and is causing investors to reassess views on transitory inflation. The core CPI data, which excludes the more volatile food and energy prices, was also higher than expected and increased 0.6% for the month of October. On a year-over-year basis headline, CPI increased 6.2% and core CPI increased 4.6%. The employment situation continues to look favorable with more than 10 million job openings and a record 4.4 million workers left voluntarily, indicating a strong labor market. In Europe, several nations began adopting or considering restrictions to curb a new wave of coronavirus infections on the continent.




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