Rates: short inflation/long duration Positioning surveys generally indicate that the rates market is neutral or short duration amid rising inflation expectations. According to our rates & FX sentiment survey, clients are relatively short in relation to their average positioning across major fixed income markets including the EU, UK, and to a lesser extent the US (Chart 42). Such position indications suggest that contrarian investors should be long duration in Europe, the UK, and the US. These positions have been factored into some of our pre-existing fundamental views, which include receiving euro vs US rates and expecting UK supply/demand dynamics to be supportive of longer-dated Gilts going into year end. We are reluctant to recommend outright long duration positions in US rates at present given that the sharp election-induced selloff could extend over the coming weeks. Consensus expects rising inflation Instead, we focus on contrarian views regarding the outlook for inflation, which underpinned some of short rates positioning and is expected to increase with US fiscal policy expansion and base effects. According to our recent Global Fund Manager Survey taken prior to the election, global inflation expectations are on the rise, with 70% of survey respondents expecting higher global CPI readings in the near term. Headline CPI has been moving higher in the US, and Chinese PPI recently turned positive for the first time since 2012. Similarly, global market-based measures of inflation expectations have been rising, with 5y5y forward inflation swaps in the US, UK, and Europe all rising over recent months and US inflation protected funds receiving nearly $2 billion in inflows since the start of October. Disinflation may strike back Risks to the near-term outlook for inflation could rise if: (1) expectations for US fiscal stimulus disappoint as House deficit hawks insist on revenue-neutral tax cuts or spending measures; (2) Beijing pushes the RMB lower before President-e