• Inflation surges to multi-decade highs
• Central banks behind the curve
• Government deficits poised to decline
• Tactical tilts align with a “neutral” posture
• Bond tilts favor high-quality/short duration

Surprise inflation threatens to upend many of the past few decades’ critical assumptions. Market reaction so far has been as expected, with inflation hedges performing better than bonds. Yet, policy responses capable of materially altering the outlook are in motion. The crosscurrents of shifting inflation, combined with the war in Ukraine, lead us to a more neutral tactical exposure between stock and bonds. This report details the “why and how” of our current tactical thinking and portfolio posture in light of unfolding events.