Equity markets finished modestly lower after the S&P 500 hit another all-time high Tuesday. 

The focus was on earnings from major retailers, with Target, Lowe’s and TJX posting results Wednesday morning.

The consumer backdrop appears robust, with expectations for a strong holiday season. However, cost pressures in some cases are pressuring profitability, even as companies are taking measures to pass through price increases to customers with a small lag. 

International markets finished mixed, while oil declined on speculation that U.S. and China might tap their strategic reserves to cool prices. 

Consistent with the cautious market undertone, bond yields declined, but the 10-year held above 1.60 percent. 

Inflation worries remain, but recent economic data suggest that high prices have not dented consumer demand so far.

Big-box retailers are reporting higher sales, and expectations are for a solid finish to the year.

Canada inflation released today rose 4.4 percent from a year ago, the largest gain since 2003; U.K. inflation hit a 10-year high; and eurozone inflation a 13-year high.

Our view is that price pressures are likely to remain strongest in the U.S. because of better growth trends.

However, we expect inflation to peak and start to moderate in coming months. 

The Baltic Dry index, a proxy for shipping prices, has declined 50 percent since last month, and there are encouraging signs that some of the supply-chain bottlenecks might be gradually easing. 

The Los Angeles port chief said that the number of containers sitting on docks has declined 29 percent, and Toyota reported that its factories in Japan returned to normal for the first time in seven months, as the flow of semiconductors improves.

The U.S. housing data reported this morning highlight the supply-side challenges, including building-material bottlenecks and labor shortages. 

Housing starts declined 0.7 percent from last month, while permits for future homebuilding increased a robust 4 percent. Strong demand trends and a lack of inventory is likely to continue to support homebuilding next year. 

More broadly, after having gone through a soft patch in the third quarter, we believe that economic growth is reaccelerating.

Some of the recent data points supporting this view are the positive momentum in the labor market, October’s strongest monthly gain in retail sales since March, and a rebound in industrial production. 

After three consecutive years of strong market performance, we expect more moderate returns next year, but with the economic outlook broadly positive, we think that the bull market will continue in 2022. 

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