- The inflation moment - Strategies to protect portfolios from inflation risk
The inflation moment - Strategies to protect portfolios from inflation risk
Tuesday 08 June 2021
Research / Market
As the global economy emerges from its worst slump since the 1930s, we envisage plenty of inflation fertilisers at stake, especially in the United States. Inflationary trends could emerge due to a combination of factors, including the cyclical recovery as countries try to get the pandemic under control and gradually lift mitigation measures. This will come at the same time as a super-sized US fiscal stimulus, supply chain bottlenecks, pent-up demand and savings, and upward pressure on wages. In addition, the infrastructure plan is likely to be passed by the US Congress in late-2021, unfolding its impact mainly in 2022-23 and in the longer run. These trends will join forces with more structural trends and a likely regime shift towards higher inflation as a way out of the crisis, as highlighted in the paper “Don’t give up on fundamental valuations”. On the Fed’s side, the central bank has been insisting that inflationary pressures are transitory, but at the end structural is just something temporary which has lasted for sometime. And investors should be ready for this!
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