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The runaway inflation of the past year is a radical change from the lowflation that’s dominated in the past decade, and this week’s hawkish talk from the Fed is a novelty for traders under the age of 35. But markets are priced on the basis that both high inflation and a hawkish Fed are temporary, not signs of a change in the economic regime.
They may not be. Long-term inflationary forces are building, as even the Bank for International Settlements, central bank to the world’s central banks, warned this week. The good news is that investors who agree with me that a shift in the economic regime is under way still have time to prepare their portfolios. The bad news is that the current inflation means it’s already expensive to protect against rising prices.
Source: WSJ
