12 Nov 2021

Gold has finally woken up. I guess the highest inflation numbers in the US in 31yrs is likely to do that.

The pace of the CPI increase has caught many off guard. There is now an 80% probability that the Fed will hike interest 3 times in 2022. Those are pretty high odds so Dr Lowe at the RBA, you may be eating your words quicker than you thought.

You can see from the chart below that the current acceleration in inflation is not your garden variety, this is big stuff. My only comment at this juncture is that given the 1 in a 100yr pandemic we have been living through the past 2yrs there might be room for some deviance.

As you would expect with the higher than expected inflation the bond market sold off hard, mainly at the shorter end which makes the curve a little flatter.

The USD continues to strengthen given the expected increase in yield in the US.

While everyone is talking Inflation I still cannot shake off the Chinese drop in Steel output and whether this is the canary in the coal mine for something much darker than many are predicting. It is so easy to fall into group think when everyone is latched onto a powerful theme.

I mentioned yesterday the IPO of car maker Rivian which at $11 bn makes it the biggest since Facebook. It now has a market cap as big as Ford and closed up 22% on the day. Something is seriously wrong in our markets.

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