Whether the US’ current bout of inflation is caused by transitory supply-side factors, or trillions of dollars poured into the economy by policymakers, is irrelevant because investors are now tasked with finding a way through the stock market jitters. As inflation rises it eats at yields and the value of fixed coupons falls. To avoid the pitfalls of rising prices look to dividend stocks, whose yields are pushed higher by inflation. Of course not all dividend stocks are created equal and some will outperform in an inflationary environment. The best income stocks are in the financial sector because they benefit from rising interest rates, as their interest rate margins expand in such environments. Energy is next, at least currently. Higher demand boosts prices of oil and gas, which benefits energy sector investors as it is one of the highest dividend payers. These sectors are the most likely to boost their dividends in the rising price environment.

FINSUM: Dividend stocks have no doubt outperformed just about every segment of the bond market, and expanding your dividend holdings may be a good idea as inflation comes in at 20-year highs. 

September saw the Vix creep to a 4-month high as the S&P 500 blew off 4.8% of its value. Most investors were hoping for a bounce-back month in October, chalking up September’s poor performance to a checkered history for the opening of autumn. However, they are likely to be remiss as volatility indexes are still climbing. The pullback in September was the largest since March of 2020, when the pandemic began.BofA said that while October is generally a well-performing month when it trails a struggling September, October can drag as well. Debt ceiling negotiations, oil price spikes, and Fed tapering are just a few of the onslaught of headlines which are giving the market fits.

FINSUM: While volatility has yet to hit the peaks of September it is already consistently above its 200-day moving average, which could be a sign of even more volatility to come.

Facebook was blacked out on Monday October 5, 2021, which they claim was related to technical issues on their backbone routers. This came just before Frances Haugen, former product manager for Facebook’s civil integrity team, said that regulators need to intervene in the ‘crisis’. Haugen told ‘60 Minutes’ that she saw Facebook consistently choose profits over public safety at Facebook.She took with her tens of thousands of documents that prove these claims. Additionally, she filed complaints with the SEC that Facebook misled investors and advertisers by not sharing the whole picture about its platform.

FINSUM: This was a huge hit to Facebook stock on Monday, but it piggybacked on the rest of tech’s rally Tuesday morning to see some recovery. It is difficult to tell how long this may loom over the stock.

Federal Reserve Bank Chairman Jerome Powell spoke last week on a panel hosted by the ECB, and relayed his frustration about the ongoing inflation pressures in the US economy. Powell said the economy’s most important concern is getting people vaccinated and containing Covid’s delta variant. Powell said the key inflationary pressures remain supply chain bottlenecks in the US economy. These supply constraints have the U.S.’s key inflationary measure (core personal consumption expenditure) elevated to its highest level in 30 years. The FOMC has raised their expectation for inflation from 3% to 3.7%, and Powell said this could continue into 2022. Powell’s Analysis was backed up by both Japan and the ECB’s respective leaders.

FINSUM: The supply shock to the economy remains as chip shortages still persist. As long as supply chains remain disrupted the unemployment/GDP and inflationary goals of the Fed will remain in conflict.

The Fed is beginning to talk tapering and that has sent treasury yields spiking to 3-month highs (since before delta was spreading rapidly). The treasury yield spike has sent Growth stocks, such as in the technology sector, tumbling. Investors caught in the middle have flocked to value stocks, such as energy and financials. These stocks have cyclical reopening qualities and investors are singing the same reflationary trade song from back in May. However, growth doesn’t look quite as sluggish, and this might keep these stocks rolling a bit longer. Supply side factors in energy in particular will keep value strong beyond interest rates falling or inflation being more than transitory.

FINSUM: Value needs this middle zone of moderate inflation and moderate growth. If either fall off or pick up too much it could push investors back into growth or push the whole market down!