Inflation remains top of mind for financial market participants heading into the new year. The Personal Consumption Expenditures (PCE) index was up 5.7% year-over-year in November, according to data released last week. The Core PCE index, the Fed’s preferred inflation measure, was up 4.7% year-over-year last month. The year-over-year increase in both the headline and core PCE indices were higher in November than in October, suggesting that upward pricing pressure has yet to abate. Given the current surge in US virus cases, along with strict lockdown measures in China (one of our largest trading partners), we expect supply chains will continue to face disruptions over the near term. The upcoming Chinese New Year holiday may also exacerbate supply chain disruptions at Chinese ports. Meanwhile, the supply and demand for labor in the US is likely to remain imbalanced, in our view, as reported covid infections in the US are currently at a record high. As such, we expect pricing pressures will remain elevated over the near-term.