Since December 2020, 10yr US Treasury yields rose 60 bps, while expected inflation remained flat at ~2.2%. Inflation (i.e. measured by “PCE” = Price Consumer Expenditures) will likely pick up significantly from current levels of ~1.4% over the next quarter because of the year-over-year base effect and cyclical market forces. The US Fed announced that it will tolerate a temporary inflation overshoot above 2%. Nevertheless, should “expected” inflation move towards 3% or beyond, bond and equity markets will be challenged as rates tend to rise and equity multiples shrink.