What a relief! The August inflation data came in slightly lower than expected. Consumer prices rose 5.3% year over year in August and just 0.1% month over month if you strip out the highly volatile food and energy items. That's kind of good. That is, it's still very high historically, but it's not getting worse. So it's possible that the "bubble" in consumer prices that has been so worrisome may be only temporary - or "transitory," as the Federal Reserve put it - after all. But that's not certain, and we'll have to see several more months of data to know whether inflation is stabilizing at this level or will continue to spike higher. What is certain is that there are bubbles everywhere in financial markets. The Stock Market The stock market is more expensive today than at any time in U.S. history, with the exception of the very peak of the dot-com bubble in late 1999. This is best measured by the cyclically adjusted price-to-earnings (CAPE) ratio, which stands at around 38.4. That ratio was around only 30 on Black Tuesday - right before the Wall Street crash of 1929. The Bond Market And how about the bond market? Bubbly? Well, typically, when the future looks bright, investors take money out of bonds so they can put that money to work in riskier assets, like stocks. That sends bond prices down and yields - which move in the opposite direction - up. But today, bond yields remain near historic lows. That indicates we're in a bond bubble too. Yes, bond yields have risen since last year's COVID-19 crash - but not by much. And with the delta variant on the loose, they're heading down again. Below is a graph of 10-year Treasury yields since 2016. This shows the real yields, which are the yields when you adjust for inflation. Real Estate, Cryptocurrencies and Commodities Home prices broke another record in June, rising 18.6% annually. And prices are now 41% higher than they were at their last peak, which was amid the housing boom in 2006. As for commodities, analysts and market observers are now saying we may be entering a new "supercycle." This time, prices of things like copper, lithium, other industrial metals, oil and natural gas are being driven skyward by a combination of near-zero interest rates (which allow investors to borrow cheaply to invest in commodities) and growing demand for all these materials. And the newest bubble, crypto, continues to inflate. Yes, crypto is down from its highs of the spring, when the price of Bitcoin touched $60,000. But it's still four times higher than it was a year ago. Crypto is an extremely volatile asset class, but if you look at the recent trajectory, it certainly shows signs of froth. What's an Investor to Do? For ordinary investors and sophisticated institutional asset managers alike, these are confusing times. Historically, certain asset classes zig when others zag. But that's not happening. Prices for all investment categories seem to be inflating. Meanwhile, inflation is still a concern, despite recent data, and you'd do well to continue to keep an eye on it. But if you're still concerned about the state of your portfolio, then fear not. Chief Investment Strategist Alexander Green and Chief Income Strategist Marc Lichtenfeld have you covered. They recently teamed up with TradeSmith CEO Keith Kaplan to discuss an excellent way to avoid trading with your emotions and keep your portfolio healthy. Alex and Marc have long used this strategy on their recommendations, but even they learned a thing or two when talking to Keith. Just click here to learn more. Invest wisely, Matt | 
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