Inflation Shock Imminent As Liquidity Tsunami Looms

Authored by Simon White, Bloomberg macro strategist,

Profits have been a key driver of inflation since the pandemic. A surge in global liquidity is set to give US earnings a renewed boost, triggering another inflation shock, even as markets ascribe a near-zero probability to price-growth reaccelerating.

As cycles go, this one keeps getting weirder. The economy since the pandemic has often defied traditional analysis, with a recession that looked highly likely last year failing to transpire. In the latest twist, liquidity has surged, metamorphosing what should be a mid-to-late cycle environment into an early one. We’re not back in Kansas yet.