The hike in US inflation looks short-term for now but the risk to US 10-year treasury bond yields is to the upside, which should favour risk assets and cyclical sectors, says JPMorgan Asset Management (JPMAM) Asia chief market strategist Tai Hui.

Speaking at JPMAM’s market briefing for 2Q2021 on April 8, Hui expects strong headline inflation over the next two to three months, though he says markets have already factored this in.

The real question will be whether inflation growth is going to sustain into 2022 and 2023. Hui admits this is hard to predict, no thanks to the combination of quantitative easing programmes by the US Federal Reserve and stimulus packages introduced by the government, including the most recent cheque of US$1,400 ($1,877.71) given to millions of qualifying Americans. Whether or not this massive quantum of easy money will trigger the return of inflation is unclear for now, he says.

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