<p style=““ class=“text-align-justify“>The latest notes out of BofA says that we are now in the transition period from the 2022 bear narrative, that was encapsulated by „inflation shock, rates shock, recession shock“, and moving on to the 2023 bull narrative, which is „peak CPI, peak Fed, peak yields, and peak US dollar“.</p><p style=““ class=“text-align-justify“>In other words, we are heading into the sunset days of the tightening cycle by major central banks – at least in terms of what is being priced in. That’s a massive endorsement for risk trades, at least on paper.</p><p style=““ class=“text-align-justify“>But I think a question that needs to be addressed is what happens if inflation doesn’t just peak and fall, but instead it peaks and just plateaus at a high level? The market’s appetite for greed hinges a lot on the relief that inflation isn’t getting any worse but is it enough to sustain a more optimistic outlook if we don’t see a material fall in consumer prices back towards 2%?</p>

This article was written by Justin Low at forexlive.com.