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Last week inflation reached its highest level since 1981 (CPI MoM = 8.5%), aligning with the whirlwind of macro, policy, geopolitical, and social uncertainty, putting downside pressure across asset classes throughout 2022.

This week we’re introducing a new series named “Four Questions With” in which we discuss topical market events with an investment professional from the Catalyst and Rational network.

This week we’re introducing a new series named “Four Questions With” in which we discuss topical market events with an investment professional from the Catalyst and Rational network.

Gold will always have a seat at that table, not because it is a commodity, but because it has an indefinable characteristic that has made humans value it for millennia – and hopefully for millennia more to come.

Even though the term “stagflation” remains an unconfirmed fear for investors as they try and draw parallels to the 1970s, that does not mean that opportunity does not exist. Rather, it is quite the opposite. A proper understanding of the intricacies of stagflation would indicate that gold, soft commodities, floating-rate bonds, short-term corporate bonds, and legacy non-agency RMBS remain the key asset classes that investors should seek to gain exposure to not only mitigate stagflation risk but to generate higher risk-adjusted returns as well.

Volatility has plagued the markets so far in 2022 as steadfast inflation at almost 8% (a 40 year high), geopolitical strife from the Russia-Ukraine war, commodity price appreciation from agricultural products to industrial metals (because of inflationary pricing and geopolitical sanction hurting supply), and the Federal Reserve’s quantitative tightening agenda (to tame inflation) have been risk-on trades for markets, highlighting macroeconomic uncertainty and projecting a possible slowdown in GDP growth globally.

“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March. With Russia invading Ukraine, such would not be the first time that the Fed used “geopolitical risk” to remain cautious on changes to monetary policy.

“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March. With Russia invading Ukraine, such would not be the first time that the Fed used “geopolitical risk” to remain cautious on changes to monetary policy.