It might feel to some as if it has been something of a quieter few days in markets this week - but there is one thing that is still at the forefront of traders' minds, and that is inflation. Following last week's most significant annual jump in US inflation in almost 30 years, the UK did not want to be left out of the headlines.
Wednesday saw the country's inflation coming in at 4.2% - the highest levels in almost ten years. Central banks have tried to assure us that all of this will be transitory, but in 2022 we may well be asking for a more precise definition of that term. With commodities performing so well in 2021 so far, it isn't easy to see how a higher cost of living will go away anytime soon.
Last week saw the pound hit its worst levels versus the US dollar for the year so far - although this week has seen something of a bounce back. With inflation higher than expected and unemployment seeming to be unaffected by the end of the government furlough scheme, expectations have been ratcheted up again that surely the Bank of England will raise rates in December.
Gold has perhaps been the surprise of the month so far. Despite the US dollar hitting its best levels since the summer of 2020, the yellow metal pushed a little further and hit a five-month high. Usually, if the dollar is going one way, then the gold price is heading in the opposite direction - but not so much over the past couple of weeks.
Again, I feel the inflation narrative here is helping gold, but before we all get too carried away, it's important to remember that the rallies in gold all through this year have ultimately come to nothing, and it has slipped back. Will this time be any different? We will have to wait and see, but the gold bugs may well be thinking that after a decidedly disappointing 2021, then 2022 could be their year - if inflation stays sticker than expected.
The new kid on the electric vehicle block, Rivian Automotive (NASDAQ:RIVN), continued higher into mid-week following last week's IPO. At one point, it was bigger than Volkswagen (OTC:VLKAF) in terms of market capitalization - without having delivered many cars to actual customers.
But that never bothered Tesla (NASDAQ:TSLA) in the early days - and the familiar FOMO (fear of missing out) is playing its part in investor enthusiasm. These sorts of valuations may seem ridiculous to many but as the old saying goes, targetted to those who were thinking of betting against the over-valued, "the market can stay irrational longer than you can stay solvent." It's a braver person than me who calls the top in many of these runaway markets at the moment.
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