If you look at the chart below, you’ll see that there is a record number of job openings at the same time as there’s a record number of people quitting the job market. You don’t have to be a rocket scientist to figure out that this will likely cause wages to go up and create more inflation. Why does this matter? Almost every major sustained market selloff has started from a policy error from the Federal Reserve raising rates too quickly. With inflation looking like it’s not just transitory, the Feds will likely have to raise rates, which gives them the opportunity to over compensate like they did in 2018.

We are in the camp that the explosion of money that has been printed and distributed to people is the cause of inflation. When these payments stop, inflation should begin to normalize. Having said that, I’m pretty sure the Fed don’t care what we think! We’ll be watching their moves closely.

¹Source: Guide to the Markets, J.P. Morgan Asset Management, 2022

If you enjoy looking at charts, click on the hyperlink directly below the chart for more information (71 pages of some great content from J.P. Morgan Asset Management).

I have also include a piece form our CIBC Economics Team entitled “Not That 70s Show”.

If you have any questions feel free to give us a call at any time.

Have a great weekend.

Milan