Financial markets hit fresh record highs despite inflationary pressure

Vrasidas Neofytou
Head of Investment Research

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Despite persistent challenges to surging inflation and the energy crisis, financial markets closed out the month of October at record highs as better-than-expected corporate earnings fuelled optimism about economic recovery after the pandemic.

All three major U.S stock indices rallied to fresh record highs as about 85% of companies have beaten earnings estimates for the third quarter, defying concerns over inflation risks and ongoing supply disruptions.

The sizable earnings growth rates reflect the ongoing global economic recovery on pre-pandemic conditions supported by the massive monetary and fiscal stimulus by policymakers, the zero interest rates, and the improved consumption.

European and Asian financial markets have soared to near record levels as well, while the leading cryptocurrencies Bitcoin and Ethereum hit fresh all-time highs following the introduction of the first’s crypto ETFs.

Investors continue monitoring the record high commodity prices as the inflationary pressure reshapes monetary policies, boosting the case for bond tapering and rate hikes by the central banks.

Federal Reserve is widely expected to approve plans for scaling back their current 120 billion dollars in monthly bond purchases and start hiking interest rates at the second half of next year.

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