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The persistent effect of inflation on investment returns is obscured by the money illusion of nominal returns.

This article explores the recovery timelines following periods of market stress, revealing how inflation often extends these periods beyond initial appearances.

Key Takeaways:

1. Persistent Inflationary Impact: The commentary emphasises the lasting effects of inflation on investment returns, driven by extensive fiscal and monetary policies globally. It also points to historical hesitance to address these inflationary outcomes, drawing parallels to past policies such as Obama’s era quantitative easing.
2. Shift from TINA to TARA: Over the 2010s, investment strategies heavily favored equities (TINA: There Is No Alternative) due to low bond yields. It is likely the strategic shift to TARA (There Are Reasonable Alternatives) will continue as bond yields offer viable returns.
3. Real Wealth Recovery Challenges: Restoring wealth to 2021 levels could require exceptionally high real returns, suggesting a re-evaluation of withdrawal rates and investment strategies is required to adapt to these new economic conditions.