MARKETS are governed by cycles. In financial media, almost all the attention is given to shorter-term cycles. The longer cycles are usually not analysed in any detail, with the common assumption being that the most recent trend will continue.
Most people in the financial industry today have never experienced an inflationary boom nor an inflationary bust. The last time we sustained high inflation was in the late 1970s. Since then, it has been one big disinflationary cycle that led to a bull market in both equities (price-earnings multiples rose in the last four decades from single digits to the current 28 times) and bonds (interest rates dropped from 20 per cent to their lowest point of zero per...
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