The Sum Of All Fears | investing.com – Investing.com

The Sum Of All Fears | investing.com – Investing.com

Yesterday’s data shocked the market with readings hitting a 26 year high as base effects, supply shortages and resurgence of demand created this biggest jump in price conditions in decades. Equity markets sold off on the news and bond yields rose, but while reaction in stocks was predictably violent the rise in yields was relatively tepid as fixed income investors remained skeptical as to the permanence of the price pressures.

There is no doubt that inflation expectations will now become the key narrative for capital markets and investors continually debate whether inflation risks are transitory or permanent. However before we examine the possible scenarios it’s worthwhile to examine the three distinct price regimes that rule the economy.