Persistent Risk Premium Threat
225 Views, 11 May 2022 01:51
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- Economies are increasingly facing stagflationary squeezes. A series of additional cost shocks would extend the pressures even without traditional second-round effects.
- Adapting to a higher operational risk premium could create additional shocks as firms pursue shorter and simpler supply chains that reverse the benefits of globalisation.
- Forecasts implicitly assume risk premia normalisation, as they erroneously did with other risks after the Great Recession. More stagflationary errors may occur.