Introduction

Question 1

What are the 4 activity/inflation regimes?

Answer 1

Regime 1 (Expansion)
- Non-inflationary expansion
- Equities, Investment grade, high yield

Regime 2 (Overheating)
- Inflationary expansion
- Commodities, housing,gold

Regime 3 (Stagflation)
- Inflationary low growth
- Inflation linked, gold
- Activity slow down -> Lower demand -> Commodities not the best asset class here

Regime 4 (Recession)
- Non-inflationary low growth
- Nominal bonds (fixed income)

Question 2

Which regime are we (developed countreis) in now ?

Answer 2

Regime 4 (Recession)
- Declining inflation and low economic activity
- We expect nominal bonds to perform well