Week in Review: October 1, 2021

Markets endured a difficult week buffeted by a number of issues. At a time when inflation was supposed to be moderating and global supply chains normalizing, global headlines raised doubts about both. Political gridlock also crept into the picture as Congress engaged in its now time-honored tradition of playing chicken with both the budget and debt ceiling.

While official readings of inflation have pointed to prices moderating, or at least plateauing, recent headlines have suggested otherwise. In China, soaring coal prices have resulted in reduced electricity generation, impacting numerous industries ahead of the all-important holiday shopping season. In the United Kingdom, a severe truck driver shortage has resulted in over 2,000 petrol stations closing due to a lack of fuel. And in the United States, over 70 container ships sit offshore waiting to unload at the Port of Los Angeles, reflecting strong consumer demand and a shortage of both trucks and drivers to move the freight to its final destination.

At a panel hosted by the European Central Bank (ECB), the heads of the U.S. Federal Reserve, ECB, Bank of England, and Bank of Japan all acknowledged the recent spike in inflation and the likelihood that it will remain elevated in the near term thanks to snarled global supply chains.

Concerns about inflation, coupled with expectations that the Fed, ECB, and Bank of England all likely will take steps soon to remove stimulus, helped push the 10-Year Treasury to a mid-week high of 1.54%, its highest level since June.