Bond markets are firmly in the driving seat. Rising yields on the back of the accelerating economic recovery are signalling the revival of inflation. They will also spur the comeback of value investing.

For too long, inflation has disappeared from investors’ radar. So, it is tempting to view its recent uptick, mainly in the US, as a mere technical rebound in the price of food, oil and manufacturing inputs from their fall at the beginning of last year’s lockdowns. But investors would be wise to take this narrative with a pinch of salt. 

This is because various structural forces may prove hugely consequential in hindsight. The key ones include a hostile environment for trade and globalisation, business and labour support public programmes and the extraordinary debt burden fuelled by the pandemic. These are set to create a turning point in the current market regime before long.