From the Great Moderation to the Great Rotation
For the past 30–40 years, investors have enjoy
ed what in hindsight was an unusually favourable environment for asset prices and index investing. After the stagflation of the 1970s, inflation steadily subsided, interest rates trended down for decades, and globalisation expanded efficiency, trade, and profitability. This backdrop supercharged both equities and bonds and gave rise to the dominance of static Strategic Asset Allocation (SAA) and passive index investing.
