Rising inflation and slowing global growth are two dominant themes casting a pall over the current market environment. With increasing geopolitical uncertainty, tightening monetary policy, supply chain challenges and higher commodity prices at play, a period of global stagflation could potentially be on the horizon.
Navigating the foggy road to normal has never been more challenging, but with a long-term lens one can better understand the strong normalising effect that disinflationary forces such as rising debt levels, technological advancements and aging demographics could have. Having a clear understanding of these can help investors better find their way.#
Investing in fixed income during a time of a high inflation and rising rates can seem worrisome. However, today’s starting yields offer an attractive entry point for investors. Yields across fixed income sectors are sharply higher than their lows over the past few years. For example, global investment-grade (BBB/Baa and above) corporate bonds currently offer a yield of 4.51%, which is higher than the 4.12% yield offered by global high-yield corporate bonds during their recent lows.
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