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One of the biggest threats facing the market over the last few months has been the rise in prices. Inflation has steadily risen as the snapback from the pandemic is underway. At first, traders were pleased with the stimulus measures and actions conducted by policy makers. However, the jump in prices has made many of them now wary. This continued this week as measures of inflation surged to levels not seen since the Great Recession. Investors continued to digest words from Fed Chair Jerome Powell regarding inflation with a positive yet cautious tone.
However, other economic data showed some encouraging surprises this week. Consumers have once again started to spend as the economy has nearly re-opened across all states. Other measures of industrial health and housing also showed a continued robust rebound.
Investors are cautiously optimistic with the start of earnings season around the corner. While it’s expected to be a strong earnings season, traders are wondering just how big the jump will be, and whether or not the current run-up in equity prices will justify the market’s current valuation.
All in all, the week continued to swing back and forth; albeit, not nearly as violently as in recent trading sessions.
Be sure to check out our previous Wrap here, when the shortened holiday week proved to be volatile.