The Long and Short of it, week ending 01 Oct 2021

Publication Type: Market Commentaries

Concerns of central bank tightening and growing inflation concerns precipitated steep declines in
U.S. stock markets with all three major U.S. stock indexes falling 3% or more through Thursday. Fed
Chairman Powell’s prepared remarks before Congress on Tuesday reiterated remarks made after the
most recent FOMC meeting, saying the Fed could begin tapering in November and that higher
inflation could last longer than initially anticipated before moderating toward the Fed’s 2% goal,
uneased stock and bond markets with the 10-year U.S. Treasury rate increasing over 9bps through
Tuesday, and U.S. stock markets dropping between 1.5% and 3%. Debt ceiling and government
shutdown concerns and President Biden’s $3.5 trillion spending bill also unnerved markets with
Congress at a debt-ceiling impasse leading to warnings of default and credit rating downgrades.
Stock markets rebounded Friday with investor risk-on appetite apparently returning with Congress
approving a stopgap, government-funding bill and as the U.S dollar fell from its almost 1-year high
and the 10-year U.S. Treasury rate finished the week only slightly higher. The PCE price index,
released Friday, increased an as-expected 3.5%, perhaps helping to reduce inflation concerns. For
the week, the S&P 500 Index fell 2.2% to 4,357.05, the Nasdaq Composite Index dropped 3.2% to
14,566.70, the Dow Jones Industrial Average decreased 1.4% to 34,327.45, the 10-year U.S. Treasury
rate increased 1bp to 1.46% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY)
strengthened 0.8% percent.

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The Long and Short of it, week ending 01 Oct 2021

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