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Recession Indicators: Amid Recovery, Inflation Scare Looms
Investors are increasingly concerned about the risk of a sharp rise in inflation once the economy has reopened.
- The path toward a full economic reopening advanced through a wintry February, with progress on vaccine distribution supporting a continued green expansionary signal for the ClearBridge Recession Risk Dashboard. While there were no signal changes, the dashboard saw notable improvement among Business Activity indicators.
- With reopening expected to spark a pickup in activity, fiscal and monetary policy still quite accommodative and the economy facing easier near-term price comparisons, investors are increasingly concerned about the risk of a sharp rise in inflation.
- Should higher prices emerge, investors will need to ascertain the drivers of inflation and recognize the difference between policy actions promoting a renormalization from crisis measures and policy tightening in order to combat overheating.
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