Prices of consumer goods have also risen, as high input costs have made production more expensive. Moreover, as the restrictions imposed to curb the pandemic were eventually lifted, the recovery in demand strengthened and, as a result, upside pressures on prices broadened and intensified further.
If this is indeed part of the puzzle, then financial innovations such as credit derivatives may, again, all else being equal, reduce long-run average risk premiums in both the equity and credit markets, over time, by facilitating risk sharing among currently active market participants, provided that participants adequately understand and manage the risk of these products.