Today, the U.S. October inflation data report was released, with unexpectedly positive results. Canadian and U.S. Markets responded resoundingly – staging the largest single day rally since April 2020 –  on the hopes the U.S. Federal Reserve may ease off its prior strong rate increase signaling.

We would like to share some commentary from Myles Zyblock (Chief Investment Strategist, Dynamic Funds) on today’s U.S. October inflation report:

The S&P 500 received a huge boost from today’s better-than-expected U.S. inflation data for October. Headline CPI rose at a 7.7% pace, down from the prior reading of 8.2% y-o-y. CPI, excluding food and energy, moderated from 6.6% to 6.3%.

The equity benchmark, which is up by +4.25% at the time of writing is on pace for its best daily performance since the time surrounding the initial 2020 COVID-19 shock. Consumer Discretionary, Real Estate and Technology are leading the way, with each of these sectors up by +6% or better.

Bonds have staged an equally impressive rally, with the 10-year Treasury yield down by almost 25 basis points on the day. This leaves the yield at 3.85%, or close to 50 basis points below the recent peak level set back in late-October. High yield, high grade, and longer data paper are all experiencing a better than 2.5% return as we close in on noon, EST. Today’s action tells us just how anchored investors have become on the inflationary risks.

While the CPI inflation data has only modestly reduced the risk of further outsized increases in inflation, the very powerful price reaction across the asset classes points to just how pessimistic investors had turned. Maybe this marks the beginning of the end of ever-increasing inflation rates.

(End of Myles Zyblock Commentary)

As always, please let us know if you have any questions or concerns about your portfolio.

Sources: Dynamic Funds