August was a good month for equities, helped by a more stable bond market. The market stabilised after the fall in the US Treasury 10 Year yield from April's 2021 peak of 1.75 per cent to 1.2 per cent in early August. There is still a vast gulf between those who believe the current uptick in inflation is transitory and those who worry that it's only just the start of something more sinister. The spread of the COVID delta variant seems to have suppressed the rate of global growth over the summer. The optimists believe we are through the worst, and growth will accelerate into Q4. The pessimists, however, think that growth will continue to disappoint and that deflation will rear its ugly head again. Worse still, some predict a return to the stagflation, low growth and inflation, of the 1970s.
Thus far, the Chairman of the Federal Reserve seems to be playing his cards well. His Jackson Hole speech at the end of August managed to satisfy both camps in the short term. He opened the way for tapering the Fed's monthly quantitative easing whilst convincing the markets that he would not take risks with growth.