A great observation from Jason Furman, a former Chief Economic Advisor to the Obama administration.

The current period of high inflation is due to both a) excessive demand and b) a supply shock.

How can we tell? Well, the supply shock is about oil and gas. In prior oil and gas shocks, core inflation didn’t rise by much.

So the only way to get a clear/compelling story about high core inflation is if we include demand.

That means the Fed (and central banks globally) is right to be raising interest rates. This needs to happen even if oil and gas prices decline, from here.

That is helpful to our overweight’s to insurance companies, which benefit from higher rates.

It is also why we’ve been a tad cautious about going “too hard” on our overweight to fixed income, specifically Australian Government Bonds. They look like a great deal, we are very happy owning them, we just don’t want to get crunched by momentum effects as they overshoot.

Overall, it is very likely that we add more, above 4%.

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