Double-Digit Rent Inflation, Equities & Household Net Worth, and a Brewing Energy Crisis

The age of the pandemic discount appears to be over as rent inflation gains a double-digit foothold in the U.S. So far, the housing boom as flown largely under the CPI radar—will soaring equivalent rents help paint a more accurate picture of the state of inflation? Meanwhile, as the S&P 500® Index posts its first monthly loss since 2020 (though it remained up for the quarter), we’re turning an eye to the wide dispersion in sector performance and how household net worth’s reliance on equities has hit a record high. Could it spell trouble ahead? On the international stage, an energy crisis is brewing in the U.K. as natural gas prices soar and economic activity has softened in both China and Japan, revisiting pre-pandemic levels. Will Japan’s decline in industrial production help it to continue to dodge the inflationary pressures plaguing every other advanced economy?

1. Equivalent rent is ~42% of the CPI. It looks poised to surge based on actual rents:

Source: The Daily Shot, from 9/30/21

2. And so far, the same ~42% of CPI has NOT captured the rise in housing prices:

Source: The Daily Shot, from 9/30/21

3. Since all good things must come to an end, we wonder if this is a sign:

Source: The Daily Shot, from 9/30/21

4. While volatility picked up at the end of the quarter, underneath the S&P 500 experienced, once again, a lot of dispersion:

Source: S&P Global, from 10/1/21

5. Gasoline and natural gas prices are going ballistic in the U.K. due to supply shortages and pandemic-driven panic buying:

Source: The Daily Shot, from 9/30/21

6. The second-largest economy is now at a shrinking manufacturing level (less than 50), as they were pre-pandemic:

Source: The Daily Shot, from 9/30/21

7. The world’s third-largest economy has yet to return to pre-pandemic levels:

Source: The Daily Shot, from 9/30/21

8. Except for Japan, the developed world is seeing inflation rise:

Source: The Daily Shot, from 9/30/21