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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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.
Gold’s 50-year relationship with inflation
In 2020, gold was one of the most sought-after assets in the world as investors wanted to cushion their portfolios from volatile equity market and economic uncertainty. Now that we’re hopefully entering recovery, can gold be a hedge against inflation?
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.
