Once again it is fears about surging energy prices, supply chain disruptions, and concerns about more persistent inflation that is sparking a move out of the more highly valued areas of the stock market, as the volatility that we saw last week, continues into this week as bulls and bears indulge in a game of pass the parcel. The pound is also suffering as a consequence of the entirely self-inflicted fuel crisis, that has seen petrol station forecourts run dry, and concern over an economic slowdown.
Having been told for months that inflation is transitory, and that rates would stay low until 2024, it is becoming increasingly apparent that recent events are sowing concern amongst policymakers, that a rate rise could well be on the cards by the end of next year, two years earlier than had originally been priced in March.
We are already seeing declining consumer confidence because of these headwinds, as US consumer confidence for September hit a six-month low, and yesterday’s comments from Fed chair Jay Powell would suggest that it would need a very high bar for the Fed not to start tapering by the end of this year, though he was keen to stress that this shouldn’t be interpreted as a timetable towards a rate hike.