Stagflation Havens
In the short term there are decent arguments that it’s time for a rally within the bear market. But ...
Three central scenarios. Soft landing, Recession, Stagflation.
The inflation-linked bond market itself is now offering a good opportunity. Breakevens (the implicit forecast derived from the gap between inflation-linked and fixed income yields) rose steadily on both sides of the Atlantic, before taking a sharp dive this month.
At present markets are saying that inflation from 2027 to 2032 will be below 2.5%, in both the US and Germany.
If you want to bet on protracted higher inflation, the market has decided to give you one more shot at some generous odds.
John Authers Bloomberg 16 maj 2022
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