After years of the NICE non-inflationary continuous expansion) global economy, we appear to be facing a VILE period (volatile inflation and lower earnings, says Fredrik Nerbrand (pictured)

“Goldilocks is dead! Her era of a not too hot and not too cold growth environment with well-behaved inflation has come to an end. In her place, a gloomier era is emerging with the three bears of Inflation, Recession and Regulation.  On average, consumers around the globe are feeling the pinch of weaker labour markets, falling house prices and costlier energy and food. This results in an outlook of measly growth and heightened inflation.  In our minds, central bankers are behind the curve on this outlook and find themselves caught between a rock and a hard place.  For that reason, inflation is likely to continue to cause market angst.

“On the back of this rather glum macroeconomic outlook, we expect reduced real asset class returns over the coming 12 months. Consequently, investors actually have to take more rather than less risk as sustaining wealth in real terms is becoming increasingly difficult. So for longer term investors, we take a neutral outlook for equities and a negative fixed income view. We believe the most promising opportunities can be found in hedge funds and commodity markets.”

Global inflation has begun to rear its ugly head. After years of the NICE (non-inflationary continuous expansion) global economy, we appear to be facing a VILE (volatile inflation and lower earnings) period.

The surprise is not so much that inflation is rising after years of loose monetary policy worldwide. Rather, the surprise is the rate at which inflation is rising and the breadth of its global reach. Only the US seems to be relatively immune at the moment perhaps because of their current recessionary economy.