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Surging inflation is forcing big investors to recalibrate their strategies

The surge in U.S. inflation is sending some of the biggest names on Wall Street into rethink mode, forcing them to recalibrate strategies that depended on bonds as a shock absorber against equity downturns.

Elga Bartsch in Frankfurt, Germany, on March 14, 2018. Foto: Bloomberg photo by Andreas Arnold.

Pacific Investment Management Co., the bond-investor giant that dismissed inflation as a "head fake" earlier this year, now expects price pressures to endure. Both BlackRock Inc. and DoubleLine Capital LP have brought forward their forecasts for the next Federal Reserve rate increase to next year from 2023.

Data this month showed the U.S. consumer price index increased a greater-than-expected 6.2% from October 2020, the fastest pace in 30 years. The report confirmed inflation as one of the most underpriced risks of 2021 and hardened concern that a five-year period of steady growth and low interest rates is finally over...

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