American businesses and consumers are worried about the upward pressure on prices.

Break-even inflation rate is basically flat, technology stocks outperform weekly stocks

Whether in the White House, consumer price data or earnings conference calls, concerns about inflation dragging down the economy are everywhere. With two exceptions, the stock and bond markets, investors seem to have really believed Powell's inflation "interim theory".

Although inflation has reached its highest level in more than a decade, the measure of bond market inflation expectations-break-even inflation-has barely changed over the past month or so. At the same time, tech giants thought to be vulnerable to a rebound in price pressures outperformed cyclical stocks that usually benefit from an inflationary environment.

The disagreement highlights a trend that has continued since the blockade began 16 months ago, in which the market remains calm, believing that hard times will pass, despite the economic woes that have weighed on companies. So far, this has been a successful strategy for investors, who have gained a foothold in the worst recession in generations and seem ready to risk it again as the latest pressure emerges.

"this is really a major dislocation, and as the earnings season continues, it becomes more obvious," said Seema Shah, chief global strategist at Principal Global Investors. "companies cannot afford to ignore inflationary pressures because it affects their operations."

People outside the financial markets are far from optimistic about inflation. As of last week, about 87% of S & P 500 companies that had reported results mentioned inflation on an earnings call in July, according to data. Concerns about the rising cost of living in the US have dragged down consumer confidence this month below all analysts' expectations, and the White House is understood to be planning to change its language on inflation in the face of Republican attacks.

The picture across asset markets in the past few months is very different from what it is today, when soaring vaccination rates and bailout cheques pushed inflation expectations to their highest level in nearly a decade. Technology stocks are under pressure as a result, NASDAQThe 100 index briefly entered the pullback zone in March.

Peter Boockvar, chief investment officer of Bleakley Advisory Group: "most people think that inflation is temporary, or at least the Fed will be highly vigilant. I think both ideas are wrong." If CPI continues to stay well above trend in the coming months, they will worry again. It is surprising that the market is indifferent to inflation, and I think the alarm bell will ring soon. "

Although inflation is hotter and perhaps even more persistent than many economists predicted, most of the rise was driven by factors related to economic restart. More than 1/3 of the increase in CPI in June came from used cars, according to the Labor Department.

These factors have helped investors get rid of inflationary pressures for a while, but companies and consumers are not as easy as they used to be. Paint and paint manufacturer PPG Industries Inc., Coca-ColaIndustrial supplies distributor Fastenal Co., and others have issued warnings about rising costs.

At the same time, ordinary Americans are feeling the pressure. CPI jumped 5.4 per cent in June from a year earlier, while average hourly wages rose 3.6 per cent. It means that wages cannot keep pace with the growth of consumer spending.

Principal Global's Shah said the contrast between market and corporate attitudes towards inflation may not last long and will eventually cause market concern if the impact of supply pressures on input costs does not fade as quickly as investors expect.

"now the corporate struggle will eventually put pressure on the market," Shah said.