BlackRock, Pimco See Inflation Risks the Wider Market Doubts

Group 1 - Money managers at BlackRock, Bridgewater, and Pimco are adjusting their portfolios in response to inflation concerns, with BlackRock building short positions in US Treasuries and gilts, Bridgewater favoring stocks over bonds, and Pimco valuing Treasuries with inflation adjustments [3][5] - The yield difference between ordinary Treasuries and inflation-protected notes has increased significantly in January, indicating rising inflation expectations, alongside a rise in inflation swaps [4] - Expectations of a strong US economy potentially reigniting price growth are influencing market strategies, particularly with the nomination of Kevin Warsh as the next Federal Reserve chair, which may lead to quicker or deeper interest-rate cuts [5][7] Group 2 - Ben Pearson from UBS highlights a potential "inflationary boom" as a major risk that investors are underestimating, which could keep the Fed inactive in the first half of the year and lead to interest-rate hikes later [6] - Steven Barrow from Standard Bank predicts that the 10-year bond yield could rise to 5% from approximately 4.25% if the White House's desire for rate cuts is not met [6] - Money markets are currently pricing in 54 basis points of interest rate cuts by the end of the year, reflecting a slight increase in expectations [8] Group 3 - There is a contrast between the cautious approach of US investors and the more optimistic outlook in the euro zone, where investors believe inflation will remain at or below target levels [9]