Market too sanguine on oil; commodities team sees low of $85, implying inflation pulse coming. 90% of DM central banks have no slack, will have to react. High govt debt + loose policy creates institutional indulgence.

Different central bank responses: inflation fighters (ECB, Sweden, CH), middle (US, CA, AU), growth protectors (UK).

That is most likely outcome.

Inflation not yet come through; will in next few months.

Policy response dictates risk assets, not energy shock itself. Stagflation worst outcome (1974). 1979 playbook (raise rates, wait for inflation fall) better for risk assets.

Shorten duration, be careful with leverage. Favor quality, well-run companies with decreasing leverage (e.g., Charter Communications). High yield spread can be powerful if policy correct.

Higher yields + lower growth hurts indebted countries/companies. UK yield curve steep due to inflationary perception; respect from markets could lower long-end cost of capital.