Global Portfolio Strategy 2021Q2 - Inflation: A Supply Phenomenon
The global economy is reopening, with the U.S. leading the way with its vaccine roll-out. While the Delta variant of COVID-19 gives pause, vaccination rates, prior exposure, and focused mediation methods will limit the impact. The challenge for financial markets is that unprecedented monetary and fiscal stimulus delivered high valuations in most asset classes, while supply demand imbalance delivers higher inflation. The latter is temporary, while the former more enduring. The catalyst for a valuation reversal is uncertain and fighting the momentum from the wave of monetary stimulus takes unparalleled resolve. As long as credit remains accessible and innovative technologies deliver compelling narratives, investors face the same burden: exiting before the momentum reverses. In this environment, timing is everything. Now is the moment for active investing to add value.