Will Inflation Deflate the Asset Bubble?

Many investors seem to be starting 2018 with expectations that conditions in 2017 – moderate growth, low inflation – will continue. As a result, they generally remain bullish on equity markets and expect little upward movement in longer term interest rates or widening in credit spreads. This expectation for a continued favorable economic outlook has been bolstered by the recent approval of tax reform in the U.S. It is prudent, however, to be cognizant of the fact that current equity valuations, low long-term rates, and tight credit spreads are also a result of many years of global monetary stimulus. A broader unwind of this stimulus, as has just recently started in the U.S. and the U.K., should, over time, pose a challenge to current valuations (absent an uptick in growth)… Read Full Article at FIN Alternatives (January 30, 2018)