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Global Multi-Asset Viewpoint
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June 23, 2022

Three Scenarios for Inflation and Markets

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Global Multi-Asset Viewpoint

Three Scenarios for Inflation and Markets

Three Scenarios for Inflation and Markets

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June 23, 2022

 
 

Inflation has emerged as the central macro issue over the past two of years. As most major central banks tighten policy, inflation trajectory will remain key to assessing the likely macro and market outcomes. In this note, we discuss three scenarios for inflation and monetary policy and assess market implications of each. While the dreaded recession scenario is a possibility, we do not see it as the dominant scenario. Higher sustained inflation in the context of slower but resilient economic growth appears to be the more likely one over the next 12-18 months, with mildly negative real returns for major asset classes. Beyond near-term considerations, recent geopolitical developments are likely to lead to accelerated decarbonization, fragmentation of supply chains and looser fiscal policies which raises the probability of inflation remaining higher on a secular basis.

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sergei.parmenov
Managing Director
Global Multi-Asset Team
 
cyril.moulle-berteaux
Head of Global Multi-Asset Team
Global Multi-Asset Team
 
 

RISK CONSIDERATIONS

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