Summary: Despite the US Federal Reserve’s unprecedented flood of liquidity, price inflation has remained subdued. As more money was printed, less was used. But when interest rates rise, the circulation of money could accelerate and push up prices. An increase in inflation would reduce the real returns of shares and bonds – potentially causing the darkest investment decade in modern history.
Key take-out: In the case of a substantial US correction, investor safeguards can include keeping bond maturity durations short and using a market timing system for shares.