Last week we published two reports that updated our global multi-asset investment recommendations. The near-run outlook is highly uncertain and investors, having been far too optimistic, are rushing into the safety of cash.
Events in the Middle East will dominate the headlines until geopolitical tensions and oil prices crest. At this juncture, we do not expect the global economic expansion to be undermined, but one must remain open-minded given the high uncertainty about upcoming political decisions.
In view of another bout of higher energy and commodity prices, there is a more traditional and durable threat to the economic expansion lurking beyond the near run, namely the likelihood of higher inflation in the developed world, especially the U.S. Barring a significant economic slowdown and a rebuilding of economic slack, we expect inflation to return to the top of the worry list once the war in the Middle East calms.
