Portugal, Institutional
Change
Inflationary implications of energy shock challenge growth
Despite heightened geopolitical uncertainty and the risk of sustained higher energy prices, the market remains priced for a relatively swift and lasting resolution of the US-Iran conflict and normalisation of energy supply and prices as well as growth and inflation. We believe markets may be underestimating the persistence of inflation. If, as we think, energy prices stay higher for longer, we could see increased divergence to the detriment of the worst fiscal offenders.
Outlook contents
Global Economic Outlook
Growth remains intact, but the US-Iran conflict raises risks of higher energy prices, firmer inflation, weaker policy credibility, and wider regional divergence.
Asset Allocation Outlook
Amid the possibility of heightened volatility, our experts favor US and emerging markets equities, European rates, quality credit, and gold, while remaining cautious on oil as well as UK and European equities.
The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.