Inflation and Beyond
Everything you need to know from last week
Hello Everyone. Quite a week we’ve had, time then to curl up and take it all in.
Up, Up and Away: To start off , lets begin by focusing on the numbers which have replaced the weather as everyone’s favorite topic of conversation. The consumer price index, which measures the cost of a wide-ranging basket of goods and services, rose 0.8% for the month, amounting to a 6.8% pace on a year over year basis and the fastest rate since June 1982. Biden says the inflation has peaked and things will get better from here on. Markets were up as CPI matched expectations. While rate traders have ramped up their expectations for the Fed tightening next year, they are pricing in a total rate hikes far less than what the Fed projected. Fed is expected to deliver their next decision on Wednesday, and analysts are watching for a potential accelerated tapering -- a precursor to eventual rate hikes. “The market is telling us that it believes the Fed will contain inflation,” said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co.
So, what happened? Two words: Supply Chain. The thing that enables stuff to come to consumers ran into some strife. It became harder to make stuff and send it around the world. The government stepped in as the pandemic unfolded and doled out stimulus packages. This led to the curious case of Demand becoming more than supply in the pandemic. A shortage of Truck drivers hasn’t helped (alternate career option?). This was what caused you to pay more for your grocery and energy bills and what caused massive jumps in used car prices
What now? While this is all a bit concerning, all indications are that we are at the peak and things should cool off from here on in. Gas prices have actually fallen over the last month, the U.S. EIA forecasts retail gasoline prices to fall further. There have also been declines in shipping costs and certain commodities, including wheat and pork, as well as a drop in wholesale used car prices that should push consumer prices lower.
The Good News: Across the economy, compensation also rose at the fastest pace on record in the third quarter setting off some of the inflationary increases. 2022 is expected to bring record high wage increases, Companies are setting aside an average of 3.9% of next year’s total payroll for wage increases. Unemployment is at an all time low. Whether the inflation will be tamed below that number only time (And Jerome Powell) can tell.
Snip Snap : First they didn’t let you have babies, now they wont let you stop. China is reportedly limiting vasectomies to get a grip on rapid population decline. Quite a far cry from the days when a one child only policy was applied in 1980 to get a grip on population growth. Twelve public hospitals in cities including Beijing, Shanghai, and Guangzhou told the Post they no longer perform the procedure. The Chinese Communist Party announced in May that it would “allow” couples to have three children and reports that members of the party were asked to personally implement this policy has caused quite the outrage. Quite the full circle.
Leader of the Free world : Angela Merkel handed power to Olaf Schulz. The lady who taught politicians and leaders of all hues around the world the rhombus hand gesture will be remembered for much more. It includes being the de facto leader of Europe, Saving Greece and not shutting down German borders to Syrian refugees in 2015 despite considerable pressure. Here’s the full piece. Take a look here at the candidates for the next leader of Europe. Challenges for her successor as the most influential country in Europe include China, Russia, and Hungary amongst others.
Bunga Bunga parties could be back! The 85 year old longest serving Post War PM of Italy could be back to fulfill a promise he made to his mother. Chances are low, but never say never when a billionaire gets into the picture we say. Meanwhile, you can read more about his Bunga Bunga parties here and reach out to us in case you need help in organizing them.
Up in the Air: In great news for non-smokers, New Zealand has announced it will outlaw smoking for the next generation, so that those who are aged 14 and under today will never be legally able to buy tobacco. Other measures include reducing the legal amount of nicotine in tobacco products to very low levels, cutting down cigarette shops, and increasing funding to addiction services. The new laws will not restrict vape sales whose usage is going up in secondary school students. Critics argue that the increase in Vaping rate is a concern since its long-term health impacts are largely unknown.
After spending more than a year on the roads, Farmers from Punjab, Haryana and Uttar Pradesh called off their agitation on Thursday. They will now begin the journey back home, having forced the government to repeal the laws they were protesting against
Economy and the Markets
S’all good man: The S&P 500 Index recorded its best weekly gain (~4%) since February, as fears seemed to abate about the new omicron variant of the coronavirus. Most of the benchmarks moved near their record highs and IT stocks drove much of the rally, as solid gains in Apple pushed the market cap near USD 3 trillion. Positive Omicron related news helped the markets. Inflation numbers on expected lines also contributed to the rally. Bitcoin recovered from the fall of the cliff experienced last week and is testing the 50,000 levels. Markets will be keeping an eye on the Fed meeting this week.
The Indian markets rose the most in eight weeks following the strong global cues. Reserve Bank keeping the key rates unchanged helped the sentiment. Nifty and Sensex were up close to 2% with the Nifty Midcap index gaining 3%. Media space was the outperformed gaining more than 9% this week. PSU banks were up in the last hour of trade with reports of reform.
Sports
Oh Captain , My Captain : In a story fit for a day time soap opera, the Indian men’s cricket team had a change of captains for the ODI format. Virat Kohli, who had expressed his desire earlier of leading the team 2023 ODI World CUP scheduled in India, was replaced by Rohit Sharma, seen by many as a better limited overs captain. Virat has a very impressive record as captain but the lack of success in ICC Tournaments went against him. Things took a spicy turn when it was revealed that Kohli refused to step down and the BCCI had to ultimately strong arm Rohit into the new role.
What we are watching this week:
West Side Story : The unofficial remake of Josh, if you don’t remember, it's the movie where SRK plays Aishwarya Rai’s brother and Chandrachud Singh plays her love interest. Wait, the unofficial remake bit doesn’t sound right does it? Ok it's the remake of West Side Story, the musical which swept the Oscars way back in 1961 (also a famous Broadway musical). Directed by the legendary filmmaker Steven Spielberg, and rebooted for the Modern generation, it explores forbidden love and the rivalry between the Jets and the Sharks, two teenage street gangs of different ethnic backgrounds. Critics are raving about it. In theatres.
Power of the Dog: If you are in the mood for something serious, you can check out this film from the Kiwi Director (Oh these pesky Kiwis again) who is making a movie after 12 years. Led by a stellar performance from Benedict Cumberbatch, the movie is emerging as the early favorite for the Oscars this year. It is about ‘Charismatic rancher Phil Burbank inspires fear and awe in those around him. When his brother brings home a new wife and her son, Phil torments them until he finds himself exposed to the possibility of love.’ On Netflix.
That’s all from us this week . Liked it ? Use that share button and tell your friends . Didn’t like it ? Tell us.
We hope you have a safe and smashing week!