BlackRock’s Li Says Markets Underappreciate Inflation Risk

The video discusses the significant inflows into ETFs during the first seven months of 2021, highlighting the market's pro-risk stance due to strong growth dynamics and supportive central bank policies. It also addresses inflation concerns, noting a shift towards a higher inflation regime driven by both short-term and medium-term factors, including supply chain shifts and fiscal dominance. The video concludes with an analysis of the implications for interest rates and the potential for inflation-linked bonds to outperform nominal bonds.

What was a key factor contributing to the record-breaking ETF inflows in 2021?

• High interest rates

• Low equity inflows

• Decreased market risk

• Supportive central bank policies

How did the market initially react to inflation data in 2021?

• With optimism

• With panic

• With indifference

• With enthusiasm

What is one of the medium-term drivers of the higher inflation regime discussed?

• Lower debt levels

• Stable interest rates

• Supply chain shifts

• Decreasing GDP

What concept is described as a situation where rising debt levels limit interest rate increases?

• Inflation targeting

• Fiscal dominance

• Debt neutrality

• Monetary policy

Why were US inflation-linked bonds recently upgraded?

• Due to decreasing inflation

• As a hedge against nominal bonds

• Because of stable economic growth

• Due to lower interest rates