The New Inflation Regime

TS Lombard argues that the world has entered a new macro era where inflation is structurally higher and more volatile, driven by shifting labor power rather than just monetary policy. This regime change particularly threatens government bonds, which are losing their status as reliable portfolio hedges against equity risk.

Key Takeaways

• 1.The world has entered a new inflation regime characterized by higher volatility and a structural floor of 2%.
• 2.Inflation is fundamentally driven by the 'power' dynamic between labor and capital, which is currently shifting back toward labor due to demographics and fiscal activism.
• 3.The safe-haven properties of government bonds are being eroded, necessitating higher structural term premia and a shift in portfolio construction.

Table of Contents

• THE NEW NORMAL
• MONEY VS POWER
• MARKET REGIMES
• 1. THE NEW NORMAL
• 2. MONEY VS POWER
• 3. NEW MARKET REGIME
• Bottom line

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