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Asset allocation after inflation has peaked

Although we suspect that inflation in the US has now peaked, we don’t think that this will prevent either long-dated Treasury yields from rising again or the stock market there from coming under renewed pressure until the middle of next year. Indeed, we expect most “safe” and “risky” assets to fare poorly between now and then. This reflects a view that their fortunes won’t turn around decisively until shortly before the Fed stops tightening policy in summer 2023, even if the central bank engineers a “soft landing” for the economy in the meantime. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

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