A just-released webinar examined the outlook for global inflation. Many of the structural factors that had held down inflation in recent decades have reversed or at least significantly diminished in intensity. MRB’s outlook for 2026 was that inflation would start to firm anew, which has already been panning out.
Critically, the era of higher input costs having to be (mostly) absorbed by companies rather than passed on to end-users is over. Success at passing on higher input costs first took hold in the second half of the 2010s, primarily in the U.S. The pandemic opened the door to significant consumer price increases around the world, and the door has not been shut since. Inflation expectations will become more entrenched the longer consumers and businesses live in a world where higher input costs can be (mostly) passed on.
Inflation has overshot DM central banks’ forecasts throughout the current decade, yet they have been unmoved. Importantly, even a mildly more inflationary backdrop is not currently discounted in bond markets. We remain bearish on bonds within a multi-asset portfolio.
