Issue 26 – What Comes Next: Productivity Revolution Plus an Inflation Uptick

A Snapshot of the Market for the Week Ended July 2, 2021:

Investors were treated to a plethora of data on the economy and the delta variant of the coronavirus, showing tentative signs that labour frictions are easing, upside inflation may be diminishing, and population immunity is taking hold. Overall, it was enough to ease wage rate expectations but not enough for the Fed to change its mind. A few weeks ago, every Tom, Dick and Harry worried about runaway inflation. Now concerns are waning. Google searches for the word inflation are down 80% from where they were during the second week of May; and even lower than they were a year ago. The amount of inflation priced into five-year Treasury Inflation Protected Securities (TIPS) has fallen to 2.4% from a high of 2.7% in May. Inflation expectations are back down to 2.0% for the following five years.


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By Hubert Marleau

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By Hubert Marleau

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