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Inflation vs Risk Assets: Inflation vs. Risk Assets

1/ Inflation versus risk assets, a 1970s and early 80's comparison

Conclusion: inflation has the tendency to move in a zig-zag way and when it comes down after a significant rise > stocks rally

This is exactly what I expect for the coming 5-10 years

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2/ We do however live in a new paradigm, MMT (modern monetary theory) is something we did not have back in the 70s > e.g. central banks have many tools to extend the creation of credit and (IMHO) the fugazi we now live in

They can postpone the inevitable for decades to come

3/ Liquidity (FED balance sheet) is the name of the game, and this could mean that the downturns in stocks can be less than they would have been in a truly free market

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4/ I expect that when inflation comes down risk assets are going to rally hard

And the asset class that's going to rally the hardest will most likely be crypto

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5/ So be prepared, zoom out, and remember to take profit cause when inflation rises again (which it most likely will > a decade of zig-zag remember?) risk assets will come down fast again

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This post is based on this twitter thread.

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