The S&P/ASX 200 (ASX: XJO) is heading towards a positive open on Tuesday according to the latest SPI futures.
As per usual, here are my three key takeaways from the week just gone.
Inflation is here, or is it?
The talking point of the week and in fact perhaps most of 2021 has been the threat of inflation. Thursday night’s CPI print in the US confirmed it, with prices rising 5% on 2020 levels, yet all hell didn’t break loose.
In fact, sharemarkets rallied and bond yields fell, the opposite of many doomsayers in recent months. Inflation has been defined in many ways but most specifically as a general rise in the price of goods and services in the economy.
Thursday’s result was anything but, in fact the increasing price of used car sales contributed over a third to the result, with energy prices also a key input.
Yet with energy prices coming off a near-zero base in 2020 and used cars clearly not a must-have by most Americans, this is clearly not a ‘general’ rise in prices; hence the market reaction.
Less mainstream commentators are now suggesting deflation may be a risk given the continued indebtedness, ageing demographic and higher savings rates around the world.
Public expectations grow
The week also saw the public expectations of business leaders expand once again, with AUSTRAC launching proceedings against no less than four blue-chip Australian companies for money laundering issues.
National Australia Bank Ltd (ASX: NAB), Crown Resorts Ltd (ASX: CWN), Star Entertainment Group Ltd (ASX: SGR) and SkyCity Entertainment Group Limited (ASX: SKC) are all in AUSTRAC’s crosshairs.
Eye-watering valuations
And finally, it was the surge in valuations of everything from cryptocurrencies to our major banks.
Interestingly, Commonwealth Bank of Australia (ASX: CBA) currently trades at its most expensive level on a price to book basis in history according to global manager T Rowe Price.