Investors seem to have become more worried about inflation recently, with evidence that the global economy is holding up better than expected suggesting underlying price pressures might prove more persistent than hoped. That’s taken a toll on both “safe” and “risky” assets. We are still confident that inflation will fall, at least in the US. But while that might help restart the bond market rally, we don’t think it would help risky assets much if, as we expect, it came alongside much weaker economic activity.
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