Market overview – Alan McIntosh, Chief Investment Strategist
The recent run of rises in global equity markets briefly reversed last week in the aftermath of strong inflation data from the US. October saw consumer prices rise by 6.2% , the highest since 1990. Even after stripping out volatile food and energy prices, the inflation rate hit 4.6%, a number not seen since 1991. Central bankers are struggling to describe these figures as “transitory” when most are forecasting higher inflation persisting well into next year. Bond yields rose in response to this data, with the market now predicting that US interest rates will rise in the middle of next year. Equities initially sold off sharply, but rallied into Friday, recouping much of the earlier weakness. Markets have had an incredible run so far this year as increasing vaccine penetration has allowed countries to re-open and economic recovery to take hold. Increasing global resistance to Covid 19 through ongoing vaccination and booster initiatives will be crucial to recovery continuing into 2022.
It was a race to the finish at the COP 26 to get some kind of agreement on climate change actions after two weeks of deliberation. In the end, the outcome was disappointing, with India and China watering down a general accord to “phase out” the use of coal power and instead agreeing to “phase down” its use. UK COP 26 host Alok Sharma’s tearful apology spoke volumes. Current agreements suggest that the global temperature rise will reach 2.4c rather than the ideal 1.5c aspired to at Paris in 2015. All is not lost however, with countries being encouraged to submit fresh pledges to reach net zero by 2050 at next year’s gathering. Hopefully persistence will lead eventually to the right conclusion.