After years of low inflation, the coronavirus pandemic has created a perfect storm of inflationary pressure as government stimulus packages, supply bottlenecks, the economic recovery and pent-up spending all contribute to rising prices. Inflation in the UK, Europe and US is now at levels not seen for a decade.
Central bankers must decide whether the increased inflation is transitory and simply part of the market’s expansionary cycle, or a structural issue that is here to stay.
A sustained increase in inflation could necessitate a review of monetary policy. This heightens the risk of volatility on markets and makes asset allocation decisions increasingly important.
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With Halloween just around the corner, the spectre of inflation has begun to haunt major economies. But is there a reason for investors to be spooked?
Stagflation risk is central to scenario planning and portfolio positioning. A shift in the market consensus from transitory inflation to stagflation could cause financial shocks.
Central bankers hold the belief that the current level of inflation is transitory. But I believe this is an upside-down theory of inflation.
Inflation in the US and other countries has been high lately, raising the question of whether the low inflation era we have experienced since the 1990s is over.
In mid-June the Fed’s Federal Open Market Committee (FOMC) met to discuss the US economic outlook and to decide policy.
One of the most significant top-down discussions impacting asset prices (bonds and equities) today is inflation: are we heading into a period of inflation or not?
A factor play on inflation
With inflation on the rise it’s about time to dust off the inflation playbook. We investigate the impact inflation has had on the Value, Momentum and Quality factors historically and how investors may want to approach their factor exposures.
The long and the short of it: inflation or reflation
Find the answers to some pressing questions about inflation which almost certainly hold the key to the trajectory of bonds, stocks, currencies, as well as commodities.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
All data is as at 10 March 2021 unless otherwise stated.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where John Greenwood and Arnab Das have expressed opinions, they are based on current market conditions, may differ from those of other investment professionals and are subject to change without notice.
