An Update from Our CIOs: What Was Coming Is Now Upon Us

Bridgewater

Research

10 Pages

Bridgewater’s investment leaders explain how aggressive policy stimulus created a surge in nominal spending that has morphed into persistent inflation. They outline why bringing inflation down likely requires tighter financial conditions and how this environment affects bonds, equities and commodities across major economies.

Date Published: April 2022

Key Takeaways

Nominal growth mechanics: High nominal spending relative to real output naturally shows up as higher inflation rather than stronger real growth.
Policy tradeoffs: Central banks must slow credit and income growth to cool inflation, which increases the risk of weaker activity.
Asset behavior: Environments with nominal growth far above bond yields have historically favored equities and commodities over fixed income.
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