Insights
Three Scenarios for Inflation and Markets
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Global Multi-Asset Viewpoint
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June 23, 2022
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Three Scenarios for Inflation and Markets |
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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Managing Director
Global Multi-Asset Team
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Head of Global Multi-Asset Team
Global Multi-Asset Team
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