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Inflation fears pushing investors into more risky assets

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Will inflation be transitory and what monetary policy changes are central banks planning that might combat higher inflation are questions investors around the world are asking on a daily basis.

One thing is for sure, the response to the prospect of negative returns on bonds has made investors move into more risky assets.

Electric vehicle maker Rivian Automotive busted 29% higher on debut last week and continued higher into the close on Friday.

The company has delivered just more than 150 vehicles, but its market capitalisation of over $100bn saw it become the second-most valuable US carmaker after Tesla, and ahead of Ford Motor Co and General Motors.

Inflation eats up the buying power of your cash and retirees know this can mean trouble. If labour shortages and supply chain snarls continue into the new year, investors will look for new ways to make income from their portfolios.

Cryptocurrencies have surged. Bitcoin hit a high last week of $68,993.

US indices are less than 2% off record highs as investors continue to pile into the S&P 500, the Nasdaq and the Dow Jones Industrial Average (SPX 500, NDAQ, and US 30).

A fear of missing out (FOMO) can push people to invest in the stock markets, it can increase risk tolerance and boost overconfidence, some analysts say.

While inflation can boost volatility in rates markets and bonds, and sometimes foreign exchange, the VIX ‘fear index’ is sitting around 16%, meaning equity markets sentiment seems calm.

Big names reporting this week for third-quarter earnings season include Advance Auto Parts on Monday, followed by Walmart and Home Depot on Tuesday.

Then Target, Lowe’s, and TJX report on Wednesday and Alibaba Group Holding and Ross Stores go on Thursday. Non-retail highlights on the earnings calendar this week are Lucid Group and Tyson Foods on Monday, Nvidia and Cisco Systems on Wednesday, and Applied Materials on Thursday.

For Australian investors, they are searching for the next Tesla, or they are investing in the companies that mine the minerals that might produce the best battery metal stock, be it lithium, copper, or nickel, cobalt, platinum or palladium.

Tesla is expected to capture one in five electric car sales worldwide this year, and electric vehicles use four times more copper than petrol cars.

Elon Musk sold almost $7bn worth of Tesla stock last week after Twitter replied ‘Yes” to his tweet asking if he should sell 10% of his stock. The Tesla CEO sold about 6.4 million shares in five days, Securities and Exchange Commission filings show. It prompted a 15% drop in the electric-vehicle company's stock price and wiped around $180bn off its market capitalisation. The disposals could continue for a couple more weeks.

Chalice Mining’s share price rose more than 40% last week after the release of its maiden mineral resource estimate for the Gonneville deposit at the Julimar Project in Western Australia. The maiden indicated and inferred, pit constrained, mineral resource estimate is for 10Moz of palladium, platinum, and gold, 530kt of nickel, 330kt of copper and 53kt of cobalt. This makes it the largest nickel sulphide discovery in over 20 years and the largest platinum-group elements (PGE) discovery in Australian history.


Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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