Large economies are at different stages of their journey towards peak acceleration, but rising prices appear to be a common theme. While for the time being markets have bought into the Fed’s narrative of temporary inflation, any de-anchoring of long-term inflation expectations could force the Fed to act aggressively. In this environment, we maintain our neutral stance on risk assets as markets are likely to stay in a ‘holding’ pattern. On USTs, investors should stick to a cautious but active stance as the long-term direction of yields is upwards. Overall, this is not a time to be complacent or to take strong directional calls.
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