Waverton's Keen on the 'fear of inflation'

Unwinding of deflation risks more worrying

In the aftermath of the correction in equities in early February, markets have very quickly regained their poise.

The S&P has regained about two-thirds of the 10% fall from 26 January. This should not be a huge surprise since the outlook for corporate earnings has remained robust and, after all, 10% corrections during strong equity rallies are not that unusual.  But what is going on in the bond market? One of the triggers for the equity market correction was rising inflation worries. Investors are concerned that this might lead to a faster path of interest rate rises rather than the very gradual path that has been promised by central bankers. Higher inflation is the equivalent of a profit warning...