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Central Bank action continues this week, with the Reserve Bank of Australia (Tuesday), Federal Reserve (Wednesday), Norges Bank and Bank of England (Thursday) all meeting. the Fed is expected to announce the start of tapering, including key details on the pace, timing and composition of its plan to reduce asset purchases.

Surging natural gas and coal prices amid a powerful economic restart have exposed a lopsided transition toward low-carbon power. BlackRock still see an orderly transition in the medium term – but with bumps on the way that could lead to growth and inflation volatility.

Global equities were back near record highs last week despite a series of headwinds. Tapering fears, concerns of peak growth, supply chain issues and Chinese property developer Evergrande’s potential default have been key market themes of late and they show little signs of abating.

Prices have climbed around the world, with commodities prices surging and U.S. inflation hitting a 13-year high. It’s the first time since the 1970s that a supply shock is the main culprit. This is where the comparison ends.

We still see a low risk of technical default by the U.S. and expect the debt ceiling debacle to ultimately resolve. The broadening economic restart keeps us tactically pro-risk, yet we see a narrowing path for risk assets to push higher and markets more prone to temporary pullbacks.

Investor focus has been on inflationary pressures and the impact on bond markets as many government bond yields continue to widen. Intertwined with these issues is how central banks react and adapt to this environment.

The recent jump in U.S. Treasury yields has spooked investors. Not all yield rises are the same. Yields driven up by rising policy rate expectations may harm equity valuations.