A Different Kind of Recovery

KKR

Henry McVey

Research

60 Pages

KKR explores why the post-pandemic cycle may look structurally different, driven by persistent policy support, excess savings, and the energy transition. It argues nearly $12.8 trillion in liquidity and shifting inflation dynamics could sustain risk assets, even as tightening creates volatility and uneven outcomes.

Key Takeaways

Liquidity Still Dominates: Over $12.8 trillion in G4 central bank liquidity since 2020 may outweigh rate hikes, supporting asset prices despite tightening cycles and slowing incremental policy support.
Reflation Regime Shift: After nearly 40 years of disinflation, KKR sees a transition toward sustained reflation, with higher nominal growth and inflation shaping asset allocation decisions over the next cycle.
Volatility Ahead Likely: As central bank “flow” slows or reverses in 2022, markets may face periodic drawdowns, even as low real rates continue to support valuations across risk assets.
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