What are scarce assets?
Scarce assets are those with an inherently limited supply, where value stems from an imbalance between availability and desirability. When supply cannot be easily expanded and demand consistently exceeds it, scarcity becomes a structural driver of value.
Unlike financial instruments such as equities or bonds, which can be scaled through corporate issuance or policy actions, scarce assets are finite. This limitation underpins their appeal, especially during periods of abundant liquidity or monetary expansion.
Macro underpinnings of Scarcity
Inflation awakens Global inflation dynamics are undergoing a structural shift. While near-term disinflationary forces such as easing supply chains persist, long term inflation expectations are resetting higher than the levels that prevailed over the past two decades. Market-based measures confirm this transition: US and European 5Y5Y inflation breakevens have steadily risen from post-pandemic lows, suggesting that investors are embedding a higher inflation floor into pricing models.
Professional forecasts echo this pattern. According to the IFO Institute survey, global inflation expectations for 2026 average at 4%, comparable to 2025 levels, and are projected to remain elevated around 4% through 2028, suggesting that inflation persistence is being reassessed. This marks a shift away from the globalisation-driven disinflationary era toward one shaped by structural cost pressures.
Central banks and the erosion of anchors
A key contributor to this regime shift is the gradual erosion of central bank credibility in anchoring inflation expectations. Policymakers now face competing mandates that extend beyond price stability to include financial stability, employment, and fiscal sustainability. Frameworks such as “average inflation targeting” that tolerate temporary inflation overshoots have subtly reshaped market psychology.
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