Institutional changes usually take a while to be fully registered with investors. The biggest topic in the market right now is the potential return around more troublesome levels. Consumer price inflation And the protective measures that investors should take.

The underlying trend of inflation is critical to financial markets and investor returns. Since the financial crisis, the rise in the prices of stocks and bonds in recent decades has been in the process of long-term relief of inflationary pressures and the central bank’s efforts to curb inflationary shocks.

One year after the global economy suddenly shut down, economic activity is accelerating.A reasonable result is a surge in inflation readings, measured this week U.S. core price It set the largest annual increase since 2008, with a growth rate of 4.2%.

The core data does not include food and energy prices, which are considered to be a more fluid indicator of potential inflationary pressures, which makes many people outside of finance confused when budgeting for the cost of groceries and gasoline.

Therefore, it is understandable that the significant increase in core indicators, even considering the basic impact of the brief deflationary shock of the pandemic a year ago, has also produced a lot of noise.

In the next few months, as the economy recovers from austerity, and fiscal stimulus measures play a huge role in the entire economy, this situation will continue to remain loud.

But what puzzles investors is that it is still difficult to judge the outlook for inflation at this stage.

Jason Bloom, head of the fixed income department, said: “The reopening and fundamental effects a year ago have caused too much chaos in the economy. It will take at least 6 to 12 months before we can clearly understand the potential. Inflation trend.” Invesco’s alternative ETF strategy.

Investors who are now worried about inflation shocks face a dilemma. Some assets that are seen as traditional hedging tools against this risk, such as inflation-protected bonds and commodities, have risen significantly. In fact, a period of inflation has already been priced to a certain extent.

History does provide a warning for those who are late to purchase expensive inflation protection measures.

The past inflation warnings were proved to be false dawns after the dot-com bubble burst in the early 2000s and the economic recovery after the 2008 financial crisis. After a brief pandemic recession, the strong and deep-rooted deflationary trend associated with aging populations and technological innovation-related costs will never shrink.

For these reasons, some investors and Federal Reserve It is expected that this year’s inflationary pressure will prove to be “temporary.” However, the force against deflation is the huge scale of monetary and fiscal stimulus measures in the past year.

Jason Pride, Chief Investment Officer of Private Wealth, stated that the impact of monetary and fiscal stimulus means that “the inflation rate may stabilize at 2.5% (annual rate), which is different from the pre-pandemic average of 1.5%.” . Glenmede Investment Management. “Inflation will be higher. At a dangerous level? No.”

In an environment of strong growth and moderate inflationary pressures, stocks will benefit from companies that are more affected by the economic cycle. Investors will also look for companies that can pass on higher prices to customers in the short term and offset the decline in profit margins.

Nevertheless, the troublesome period of high inflation cannot be easily eliminated. If economic growth continues until next year, and is accompanied by a trend of economic growth, the “temporary” argument may be challenged. Higher wages in the company Found it difficult to attract workers.

Before this point is reached, the inflation rate expected to enter the bond market is likely to exceed the peak of the past two decades and enter uncharted territory in the United States and other developed markets in the United Kingdom and Europe.

In recent months, the bond market’s forecast of future inflationary pressures over the next five to ten years has risen sharply. But the rebound started from a low level. At present, the expected inflation rate is far from exceeding the Fed’s long-term target of 2%.

Pimco Commodity Investment Manager Nicholas Johnson (Nicholas Johnson) said: “The changes in inflation expectations have driven asset returns.” The asset manager said that after evaluating nearly 50 years of data, holding investments in stocks and bonds during periods of rising inflation The portfolio has performed poorly, and real assets, including inflation-linked bonds and commodities, have prospered.

Johnson added: “Most investors have not experienced a surprising period of inflation.” Customers are asking more questions about isolating their portfolios, but their current exposure to commodities and other assets shows that from Broadly speaking, investors “have not paid too much inflation premium.”

This situation can be changed, and the prospect of changes in the inflation system is still a wildcard for investors.

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