The fast view

Markets face a potentially difficult transition as monetary policy is normalized.

  • Consider hedging against the risk that inflation moves higher than policymakers anticipate.
  • Duration should be kept short. For defensive diversification, rather than traditional government bonds, consider cash, creditor-nation currencies and US dollars.
  • Consider also shifting away from parts of the market that have done well since the Global Financial Crisis, like growth equities.
  • The equities of companies with pricing power, and that start with reasonable valuations, are best placed if prices continue rising. Volatility may provide the chance to add exposure to longer-term thematic opportunities


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