Surging Inflation, Early Signs of Stabilization in China, and Growing Evidence of a Market Top

Perhaps we’ve rediscovered why there is a worker shortage. Inflation, stagflation, and more inflation. This does not look “transitory” and the rates of inflation may shock you. What can cash inflows tell us about the future? China’s high yield markets show signs of stabilization while other signs point to a market “bubble-like” progression. Is it time to be nimble?

1. While immigration is now a hot political topic, it shouldn’t be. Our history is steeped in and indeed our economy depends on immigration. If we turn off the “spigot,” then we get worker shortages, especially at the low end of the pay scale: 

Source: The Daily Shot, from 11/15/21

2. A great recap of stagflation from the 1970s. Stagflation is not an event; it is an economic phenomenon that plays out over time. It is not pleasant as the inflation erodes purchasing power while economic growth is low or negative:

Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research & Scotia Capital, from 11/15/21

3. Does this look transitory?

Source: The Chart Store, from 11/14/21

4. Some historical perspective on CPI:

Source: The Chart Store, from 11/14/21

5. Free shipping means a lot more these days as freight rates are up 36% YOY:

Source: Cass Information Systems, from 11/15/21

6. The prospect of rising interest rates has put a bid under the USD. Typically, this has been a headwind for gold, but perhaps this historical inflation hedge has some running room? Breakout or false breakout?

Source: The Chart Store, from 11/14/21

7. We’ll start the taper next week…

Source: The Chart Store, from 11/14/21

8. European equities are at a record discount to U.S. equities. Is it finally their time?

Source: Bloomberg, from 11/15

9. There is a lot of info in here! If rates continue to meander higher, how will the bonds fair?

Source: Goldman Sachs, from 11/15/21

10. China’s junk debt markets appear to be stabilizing:

Source: The Daily Shot, from 11/15/21

11. Alpine Macro shows us why learning from the past may bring prescient information. We’ve commented before that this market feels like the late 1990s. The good news, history suggests a lot of potential upside in the short term, but be ready to adjust quickly when the music stops:

Source: Alpine Macro, from 11/15/21

12. Another sign of a market top? This is similar to the “Nifty 50” and the tech bubble. Analysts straight-line growth to the moon and it just cannot go on forever…

Source: BofA Global Research, from 11/15/21