SUPPLY CHAIN STRAIN: OVERVIEW
One of the most salient economic consequences of the COVID-19 pandemic has been the sharp disruption of global supply chains. The evolution of these disruptions present significant market implications given its effect on the inflation outlook and the policy response. A more benign inflation outlook from these sources should reveal compelling opportunities as markets price in prolonged inflation and substantial monetary policy tightening.
Fixed income investments are subject to credit, market, and interest rate risks (including duration risk, prepayment risk, and extension risk), and their value will decline as interest rates rise; call and redemption risk, where the issuer may call a bond for redemption before it matures. High yield (“junk”) bonds are subject to greater credit and market risks. Liquidity risk exists when particular investments are difficult to sell.