The US S&P index has very quickly covered the lost ground lost by its fall caused by the implementation of measures to deal with the Covid-19 pandemic. It is constantly growing, breaking one record after another.
The Fed expects inflation to be transient and monetary tapering to be implemented smoothly, causing mild corrections in the fundamentals of the economy and stock market indices. But inflation has come to stay. Many commodities price increases in summer futures have not yet passed into consumption. This will be done by mid-Autumn 2021.
Inflation will move above 2% per year and will force the Fed to implement a more “violent” tapering. Such a prospect will put the economy and the markets in a new and worse context, landing them abnormally in a different reality.
It is very likely that in 2022, S&P will lose all the profit it made during 2021, eventually moving below 4000 points.
