July 11, 2020

Inflation: low probability; high impact

Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist

We are often asked about the risk of inflation. We think it is a low probability scenario but with sufficiently high impact to warrant investigation. History provides few easy answers but we conclude with a list of assets that we believe are most likely to mitigate against inflation.

Have you experienced serious inflation? If so, can you remember how it feels? I pose those questions because many investors are asking whether we expect inflation as a result of Covid-19. Our simple answer is that we would expect recession to drive inflation lower, but we can see why some are talking about the possibility of a resurgence. Given the lack of serious inflation for much of the last 20 years we thought it worth dusting off our memories of how different asset groups could react to such an outcome.

For our more in-depth assessment of how different asset groups could react to inflation, click here.

Investment risks

  • 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.

Important information

  • Data as at 10.07.2020, 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 individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.