Amidst a fraught backdrop for macro risk, uncertainty around inflation is a new and vexing challenge for investors. And with this in mind, it was my pleasure to host a conversation with Lindsay Politi, the Head of Inflation Strategies at One River Asset Management. Through our discussion, we learn about the framework she has developed over two decades in fixed income with an emphasis on trading inflation. In Lindsay’s rendering, inflation is not a single variable but needs to be understood through unique cycles and in specific geographies and economies. Fiscal and monetary factors matter in driving inflation, but so to do structural components of labor markets, like demographics, and the degree to which wage and price growth can become linked in how employees and employers think.

Today’s environment is unique in the impact of Covid and how it has created supply chain risks that are not easy to reverse, leaving the potential that today’s elevated inflation levels will not soon recede. We next turn to the ecosystem of products that pay out specifically on realized inflation. Here, Lindsay comments that shorter-dated, income oriented products have done quite well as the realized level of CPI has far outstripped anything that was implied even a short time ago. Rounding out our excellent conversation, we explore the Fed and how it impacts market prices. Lindsay sees lots of manipulation in prices but still valuable information to be derived from metrics like the break-even inflation curve.

I hope you enjoy this episode of the Alpha Exchange, my discussion with Lindsay Politi.