By SNW Asset Management via Iris.xyz
As we mentioned in our quarterly webcast last week (link here), inflation is the data point that seemingly everyone is focused on these days. Central banks are watching inflation closely as they determine when and how quickly to normalize monetary policy. Market participants are watching inflation to decipher when and how quickly central banks will normalize policy. Put simply, monetary policy matters and inflation has become the key indicator to determine how the level of accommodation will evolve.
Despite low unemployment in most advanced economies and improving growth around the world, inflation is the one metric that is not running at levels consistent with the goals of central banks. We believe the timing of monetary policy normalization will impact not just government bonds, but also risk asset sectors ranging from corporate bonds to stocks to alternative investments. Post the financial crisis, central banks have expanded their balance sheets at a rapid pace in an effort to push all asset prices up.
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