The degree of inflation the past few years has stretched the ‘K’ that defines the K-shaped economy, says Cindy Beaulieu, chief investment officer at Conning Noth America, in the latest ‘Credit Exchange with Lisa Lee’ podcast. Asset valuations and home prices have further added to the pressure.

The labour market is central to consumers in both the top and bottom of the K. The upper cohort are participating in the economy in a strong way. The bottom cohort are also participating – but even a modest amount of inflation is painful for them, because the base level of prices now is so much higher than it was just a few years ago.

“I would put right in the centre of those two lines of the K, the labour markets,” says Beaulieu, who sets fixed income and equity strategy for Conning North America, which serves the insurance industry and has nearly $200bn in assets under management. “It’s kind of like a rubber band. As long as it doesn’t snap, it holds the K together.”

In terms of investing, Beaulieu thinks corporate fundamentals are good. While valuations are stretched, all-in yields are accretive, particularly to fixed-income portfolios. She likes the structured areas and private placements.