The past six months have been worst in many ways but the most concerning of them has been inflation going up month after month throughout the world. This has led to a full shift in the financial and real world.
But the next two to three months might provide some relief to the extremes that are creating panic and fear. Please do understand it will be maximum a relief, not a reversal.
There are many reasons for it but let's look at a few. First will be a pause or slight fall in inflation when compared month on month. This would be driven by a reduction in the three-month rolling commodity price average with various governments providing energy-related relief measures.
Second, will be driven by central banks. As the data softens during these months the incremental aggression would be reduced. This would cool off the volatility in swap rate markets and lower its impact on asset prices. In addition, there is a gap of two months in Fed meeting after the one in July end.
The third will be from the demand side, as it is the holiday season in many of the largest consumer spending countries there would be some relief to the demand for the goods. It would also coincide with China's blockages easing hence further improving the supply of goods just in time for the festival demand.
Last would be from the market side, as there would be relief in these major factors it will lead to better than estimated data. This would give some relief to the markets from the worst first half since 1970.
Though all these scenarios run various risks there is a good probability that they would unfold as estimated. But as in previous cases, this relief might be only short-lived as there would be the next set of issues from October.