Volatility and Fear. In recent weeks, the stock market has decided the economic pain associated with an eventual tightening of fiscal and monetary policy is more likely to come sooner rather than later.

Thankful, but Watchful...So for now, be thankful. We remain bullish on equities and the economy. A bear market or recession in 2022 is very unlikely. But don't be complacent. Be watchful and be ready to shift, as always, if circumstances change.

Inflation Returns. The M2 measure of the money supply is up almost 40% from where it was in February 2020, substantially faster than the pre-COVID trend. Ultimately, this is the root cause of the inflation we’re seeing.

Eyes on the Federal Reserve Investors will be focused on the Federal Reserve this week and our expectation is that it will finally announce an overdue tapering of quantitative easing.

The Cost of Lockdowns. It is now clear that the cost of the lockdowns is immense. Locking down the economy threw complicated supply chains into chaos, and restarting them is not as easy as many seem to think.

Resist Inflation Complacency. Some analysts and investors breathed a big sigh of relief on inflation when it was reported last week that the Consumer Price Index rose 0.3% in August versus a consensus expected 0.4%. But we think any sense of relief is premature.

Fed Being Tempted Into SIN. We think consistently higher inflation is a bad idea. Printing more money is not a path to sustainable prosperity. Higher inflation would make business planning more difficult and reduce the "real" (inflation-adjusted) wages of workers, particularly those with the least bargaining power, including lower-income workers.