The previous week turned out to be very fruitful for the US stock market. The Federal Reserve announced the tapering of the quantitative easing program (QE), but the US stock market did not seem to mind. At the same time, we have repeatedly warned that QE tapering is considered a negative factor for the US stock indices since they have been bullish for the past 18 months owing to this very program. At the same time, there is another factor boosting stock indices and driving them into the state of a bubble. Indeed, the inflation rate in the United States continues to accelerate, making experts and journalists worried. Meanwhile, Jerome Powell and Janet Yellen still consider the current rise in prices to be temporary and expect inflation to slow down next year. At the same time, many American experts no longer believe that the Federal Reserve could bring the inflation rate under control. The October inflation report is scheduled for this week. The indicator is expected to accelerate to its 30-year high of 5.7-5.8%. In other words, investors are forced to put their capital in steadily rising stocks not to incur losses. Consequently, the US stock indices and the cryptocurrency market are likely to extend gains.
Notably, US Treasury Secretary Janet Yellen is still showing no signs of panic. Moreover, she continues to insist that the inflation rate is under control. Janet Yellen expects inflation to return to its normal levels in the second half of 2022. She blames a rapid surge in consumer prices on the coronavirus pandemic and the supply chains issue. In addition, Yellen pinpoints that demand is recovering faster than supply after the crisis, thus boosting prices. On top of that, commodities and energy prices are rising worldwide. All this is fuelling the consumer price index that is currently at 5.4% y/y. At the same time, in some industries, inflation is even higher. This can be easily proved by looking at price charts for steel, copper, oil, US real estate, etc. In other words, the actual inflation rate is above 5.4%. Generally speaking, the United States and the entire world are likely to face inflation-related difficulties in the coming years because pumping extra cash into the economy would surely have its consequences.
