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.
