A Change of Pace for the World Economy

Inflation is back, or so the markets say. Market-measured inflation expectations for the United States have risen sharply over the past two months, and though the measure might be discounted on its own, there is more to the picture. The past few months have ushered in a global bond sell-off, a marked reversal of the prolonged frenzy that dropped more and more bond yields into negative territory as investors piled into the asset class. Oil prices -- which plummeted in 2014-15, dragging down overall prices with them -- appear to have stabilized, along with those for industrial metals. Similarly, factory prices in China seem to be recovering for the first time in years, an improvement that could eventually reach the rest of the world. Assuming these signals are not false alarms but harbingers of inflation, the global economy may be in for a big readjustment in 2017....