Transitory Inflation Called into Question, Bond Market Could Be Harbinger, and China’s Debt Bubble
July 19, 2021 | FIRESIDE CHARTS
More inflation data continues to roll in both here and abroad, and there is no sign yet of it backing off despite Fed Chairman Powell’s claims. Looking at the debt situation (which includes CPI inflation) and recent wage inflation, the transitory view is being called even more into question. Meanwhile, the bond market may be signaling that equity prices are ahead of themselves, and small and mid-caps have given up their lead. But this could just be a hiatus caused by the Delta Variant as it continues to make itself know in the Midwest and throughout Europe. A strong presence of the variant in Asia could also put stress on the Global supply chain and China’s debt bubble is cause for concern as their bank loan growth continues to outpace the U.S. by far.
- Will inflation prove to be more transitory and retreat, or has a more permanent cycle, including wage increases, let the genie out of the bottle?
Source: The Daily Shot, from 7/19/21
2. Europe’s recovery, including inflation, appears to be a month or two behind the U.S.:
Source: The Daily Shot, from 7/19/21
3. Let’s remind ourselves of our current debt situation. This view includes the CPI inflation:
Source: The Chart Store, from 7/19/21
4. Although a surge in tax receipts and the lack of new stimulus spending have improved the deficit somewhat:
Source: The Chart Store, from 7/19/21
5. Retail sales came in a bit stronger than expected and remain well above pre-Covid trends. Will the pent-up demand wane or will the spending accelerate?
Source: The Daily Shot, from 7/19/21
6. Small and mid-caps have fully relinquished their leads:
Source: The Chart Store, from 7/19/21
7. Are the bond markets telling us that equity prices are ahead of themselves and/or the economic recovery? Or is this the Delta variant pause?
Source: The Chart Store, from 7/19/21
8. How much of this bond rally is due to the Fed’s open market purchases?
Source: The Chart Store, from 7/19/21
9. The Delta variant has zeroed in. This will not help the global supply chain!
Source: The Daily Shot, from 7/19/21
10. Has China created its own financial debt bubble?
Source: People’s Bank of China, from 7/19/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.