It’s been a tough year for investors in most asset classes. Schroders experts explain the current turmoil, and where they see opportunities developing in the coming months.
Why have financial markets been especially volatile recently?
Keith Wade, Chief Economist & Strategist at Schroders: “What we’ve seen this year has been the end of a prolonged era of low inflation. A number of factors have led to inflation surging recently – not least Russia’s invasion of Ukraine and China’s Covid-19 lockdowns. There’s been a lot of focus on inflation recently in the UK, but it’s not just a UK problem.
“The important point about high inflation is that it’s a good indicator that a recession is about to follow. It squeezes household incomes and is also usually followed by tighter monetary policy from central banks. This means borrowing is more expensive and hence has a cooling effect on economic growth.
“We haven’t seen inflation fall from these kinds of levels without a fall in GDP in the region of 2% to 3%.
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