Avoiding the growth trap: Confronting the sanguine inflation consensus

Searching for pragmatic opportunities vital

There are few investors currently prepared to take a contrary view on inflation. Most are expecting it to rise but view it as transitory – a shorter-term consequence of Covid-19 already broadly priced into markets.

But what if near-term inflation surprises on the upside? What if higher inflation is here to stay for the longer term? Many portfolios are poorly positioned for these outcomes. At Antipodes, we are expecting more volatility in inflation relative to recent history. Our modelling suggests US headline inflation could hit north of 5% by the end of the year, versus an average closer to 2% over the past two decades, while core inflation could rise in a sustained manner from next year. There are a number of drivers supporting the notion of higher inflation for longer. Multi-asset managers...