What if Inflation is Not Transitory?
Financial markets have performed well this year. While rising stock prices surprised many investors last year, they are in line with positive economic growth this year. The pandemic seems to be more or less behind us and there are only a few clouds on the horizon. One risk that should not be ignored, however, is inflation. Whether the US Federal Reserve is right and high inflation is only transitory, we will probably not see until the end of the year at the earliest. Until then, inflation rates are likely to increase further and remain high. If the central bank does not react and interest rates rise sharply, it could lead to a sell-off on the stock market. It is therefore important to reduce risk compared to the beginning of the year and keep a close eye on portfolio risks overall.