Most expected announcements of the capital markets for several quarters already are those related to the inflation measuring, although it is already evident to everyone at the global level. These data, following the publishing by the central banks (now higher than the projections that the central banks had for year 2021), have serious impact on global markets and determine the investment strategies of all participants. Thus, in the first half of year 2021 we witnessed the tremendous growth of major part of the raw materials, partially caused by speculation motives followed by their large correction, as well as evident repositioning of the global portfolios toward investing into companies with longer history of positive results, excellent market positioning, stable dividend policies and major and valuable brands. These companies, largely part of the still active bull market cycle, were at the margins, on the account of generally young technological companies which were projected to have huge annual growths (in terms of income, market penetration, technological achievements, etc.) in early phase of development with extremely high capital needs and negative financial results. Although the reasons for this “growth to value” rotation could also be identified at many other places, expectations for pacing up the inflation rates and consequent expectations for interest rates growth, which would contribute to lower values of the future discounted cash flows, are surely to be one among the major ones.
During this entire period the largest central banks diligently defended their expansive monetary policies, identifying the growth of the price levels as transitory, mostly caused by the distorted production and distributive chain supplemented by speculative market movements, as well as the increased current consumption as a result of abolishment of the quarantine measures around the world, the vaccination and in general, more free functioning of the entire world population. Despite of the assurances of the central banks, as well as part of the investment world which support the thesis by the central banks for the transitory nature of the inflation (a thesis that the world due to their level of technological advancement and huge labor productivity is in naturally deflator state), the price of the bonds noted certain decline and increase of the interest rate level (e.g. interest rate of the 10 year bonds issued by the USA raised from below 1% at the beginning of 2021, to the level of 1,6% at the moment).
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