The distortions created by central banks make it dangerous to read too much into price signals
The disruption of global supply chains has been a wakeup call for the European Union. For years, the principle of an open and free Single Market has led to a massive transfer of industrial production and outsourcing mainly to Asia.
Since the mid-1980s, the macroeconomic volatility has declined to a postwar low. The Covid-19 crisis brought one of the largest economic shock in modern history and could mark the end of the Great Moderation i.e. a turning point with higher economic volatility and a shift to a higher inflation regime. Those factors are likely to lead to higher financial market volatility than in the previous two decades.
While inflation is expected to rise after last year’s lows, it will likely be transitory. Sunil Krishnan explores what this means for the economy, yield curves and equity markets.