Inflation dominated financial headlines this week, as the latest US Consumer Price Index (CPI) reading was higher than anticipated. On Wednesday, the latest year-over-year CPI reading of 6.2% was released, marking the biggest increase in more than three decades. “Inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me,” stated President Biden on the news[1].
Investors fear that surging inflation may force the Federal Reserve to raise rates more quickly than anticipated in an effort curb rising prices. Both equity and fixed income markets sold-off on the news but stocks did bounce back somewhat on Thursday and Friday to end the week down just slightly. The S&P 500 (a proxy for large-cap US stocks) was down 0.3% for the week and the MSCI ACWI index (a proxy for global large-cap stocks) essentially ended flat. Bond markets also ended the week lower, with the Bloomberg US Aggregate Bond index (a proxy for US bonds) falling[2].
Geopolitical tension also increased last week, as the US warned European allies that Russia appears to be building up troops on the Ukrainian border. Moscow has been at odds with the European Union on migration and energy issues recently, which only exacerbates concern over their intent[3].
Prices & Interest Rates
| Representative Index | Current | Year-End 2020 |
|---|---|---|
| Crude Oil (US WTI) | $80.69 | $48.52 |
| Gold | $1,868 | $1,893 |
| US Dollar | 95.12 | 89.94 |
| 2 Year Treasury | 0.53% | 0.13% |
| 10 Year Treasury | 1.58% | 0.93% |
| 30 Year Treasury | 1.95% | 1.65% |
| Source: Morningstar, YCharts, and US Treasury as of November 13, 2021 |
Asset Class Returns
| Category | Representative Index | YTD 2021 | Full Year 2020 |
|---|---|---|---|
| Global Equity | MSCI All-Country World | 18.7% | 16.3% |
| Global Equity | MSCI All-Country World ESG Leaders | 21.3% | 16.0% |
| US Large Cap Equity | S&P 500 | 26.2% | 18.4% |
| US Large Cap Equity | Dow Jones Industrial Average | 19.8% | 9.7% |
| US Small Cap Equity | Russell 2000 | 23.1% | 20.0% |
| Foreign Developed Equity | MSCI EAFE | 12.5% | 7.8% |
| Emerging Market Equity | MSCI Emerging Markets | 1.4% | 18.3% |
| US Fixed Income | Bloomberg Barclays Municipal Bond | 1.1% | 5.2% |
| US Fixed Income | Bloomberg Barclays US Agg Bond | -1.7% | 7.5% |
| Global Fixed Income | Bloomberg Barclays Global Agg. Bond | -4.4% | 9.2% |
| Source: YCharts as of November 13, 2021 | |||
[1] Source: US Inflation: October Consumer Prices Rise 0.9% From Last Month, 6.2% From 2020 - Bloomberg
[2] Source: YCharts
[3] Source: U.S. Warning Europe That Russia May Invade Ukraine - Bloomberg
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