World stock markets have climbed higher this year after investors bet on several interest rate cuts by developed market central banks. Prospects of easing financial costs have benefited risky assets, but with inflationary pressure still persistent in the US economy, the Federal Reserve is reevaluating its inflation assessment, reversing early stock gains and injecting volatility across asset classes.
The Federal Reserve’s economic projections impact capital allocations, as its inflation outlook sets the risk-free rate used to determine return on investments. But the direct effect of a developed market rate cycle on Asian and emerging markets is typically more nuanced than a simple correlation, according to Rahul Ghosh, portfolio specialist in...
