The inflation data released last week provided more information on the challenges facing the economy and the Federal Reserve to navigate the current environment. With inflation running at levels that haven’t been seen in 30 years, the debate persists about whether it will settle back to a more acceptable level during the upcoming year or continue to push higher. The unprecedented shock of the pandemic, combined with the impact of trillions of dollars in monetary and fiscal stimulus, has made the path forward very uncertain. The implications of future inflation are great for financial markets and the real economy.
At this point, it is hard to see the inflationary pressures abating in the next several quarters. The supply chain issues plaguing many sectors have not started to ease in a meaningful way. I expect stock and bond prices to come under pressure in the early part of 2022.
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