This past week, investors in U.S. equities benefited from news of an extension of the Bush tax cuts, increased U.S. consumer confidence, a narrowing of the U.S. – China trade gap, a continuation of jobless claim benefits, along with markets that were less concerned about European sovereign debt issues. On Saturday, the Chinese government said its consumer price index rose 5.1 percent in November. This is the largest increase in 28 months driven by sharp price increases in food, retail sales and property construction.
MY TAKE: As some markets have moved higher, there seems to be a sense of “Risk On” with analysts increasing their 2011 estimates. I would suggest a more cautious approach as we move toward the end of the year. While “decoupling” among major global markets may take place, this is generally not the case. If inflation in China persists, there are significant implications for investors globally.