Last week saw a focus on the central banks, with various interest rate decisions from around the world. This week highlighted the possible reasons just why central banks are being so closely watched.
It’s inflation, of course - and on Wednesday we got confirmation about just why we should be perhaps a bit more concerned than the central banks have been. In October US consumer prices jumped at their fastest rate for more than three decades.
We would have to wind the clock back to 1990 to see it faster. The October figure showed inflation at 6.2% and this was something of a surprise for markets. Stocks wobbled, the dollar jumped and even sleepy gold managed to push towards a 5-month high.
This does set the stage for an interesting few months. If this stage of higher inflation is transitory as the central banks have assured us then there is nothing to see here. But if it isn’t, then markets may start to get jittery about what this means for interest rates and of course the wider economy. Given the rise of commodity prices this year we shouldn’t be too surprised if inflation sticks stubbornly high for longer than some expect.
For the week so far, stocks didn't quite manage to reach fresh all-time highs with the NASDAQ and S&P 500 both giving up some gains, but nothing too drastic when we look at the size of the rise since early October.
Elon Musk Dumps Tesla Stock
Elon Musk was in the spotlight - perhaps no change there - as he offloaded around $5 billion of Tesla (NASDAQ:TSLA) stock. Whilst this is a pretty sizeable chunk of stock by most standards, for Mr. Musk it is less than 5% of his total Tesla position.
But it did affect sentiment with Tesla taking a reasonable hit on the week so far, at one point briefly trading below $1,000 a share. In early October, Tesla stock was below $800. But it will be interesting to see if Musk’s sale and the corresponding volatility in the Tesla stock take away some of the investors’ exuberance we have seen in recent months.
Bitcoin and Ehereum Make All-Time Highs
Both Ethereum and Bitcoin made all-time highs again this week - although there still appears to be some caution and both have struggled to maintain the momentum. While some investors use other investment instruments to hedge against inflation, will the latter make crypto more attractive as a hedge against the higher cost of living?
If rates start to rise then you could expect the old-fashioned US dollar to head higher too - and this could put some pressure on the cryptocurrencies. But overall, with the likes of Bitcoin having set fresh all-time highs within the last couple of days it might be too pessimistic to start feeling that the mania has peaked just yet.
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