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22 December 2024

Home / White Papers 2024

Regime shift: Characteristics of the ‘next’ economy and implications for Fixed Income

Written by Stuart Dear, Kellie Wood and Sebastian Mullins. This paper is the collective work of our domestic investment desks in collaboration with our global colleagues.

The post-GFC years were characterised by low inflation, low interest rates, low macroeconomic volatility, low dispersion between regions, industries and companies and strong asset price returns aided by stimulative monetary policy. However, this period also saw growing imbalances, including worsening inequality, rising debt loads, supply-chain fragility and widening geopolitical fractures.

COVID-19 triggered a break to the relative stability of the post-GFC years. Supply chain disruption (exacerbated further by the Russian invasion of Ukraine) and strong demand stimulus (fiscal and monetary) shocked inflation higher, catalysing belated aggressive tightening by central banks and increased market volatility.

While the future is unknown, we believe a return to the post-GFC environment of low inflation and low macroeconomic and price volatility is unlikely. Indeed, we think a shift to a different regime is in the making.

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