#inflation has continued to surprise on the upside: #PCE beat expectations in the US and inflation has picked up in #Europe.

While #breakevens have priced in further #reflation, nominal and real rates have reacted less recently, in part due to continued dovish signals from the #FED.

As #markets continue to analyze the risks of an excessive rise in inflation, the correlation between #shares and #bonds has become markedly positive. This correlation has been structurally negative over the past two decades, in line with historically low inflation, but we see that inflation above 2% has generally resulted in a more positive correlation.

For #investors concerned about higher inflation or more aggressive #monetary policy and the impact on equity/bond correlation, we believe commodities continue to offer the best inflation hedge. The correlation between equities and commodities has been positive in the Covid-19 recovery, but has recently turned more negative, offering more diversification possibilities outside of equities and bonds. https://bit.ly/3cH8tEH