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‘The juncture’ looms for investors


Politicians everywhere would be happier if persistent inflation could be managed down without triggering a recession or market shocks.

Unfortunately, in the real world it rarely works out that way. With elections coming soon in the US and France, and with leadership challenges elsewhere, threading the needle of non-inflationary growth will be problematic. A more contractionary monetary policy will also lead to significant risks for financial managers.

Liquidity is not just an abstraction in central bank economic models. It is also the assurance that small savers and investors can readily access the assets in their accounts. Low cost, high speed electronic markets for mass investors have created the illusion in recent years that assets can always be valued, traded or cashed in within fractions of a second.

Most are unaware of the dealing costs incurred by asset managers and traders. Hedging, or managing dealing costs, becomes expensive as markets…

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