Three reasons why convertibles thrive when rates rise

Resilient during inflationary periods

Tackling inflation requires an investor to be a student of history, as well of markets. Not many analysts will remember grappling with peaking inflation in the 1970s and 1980s, let alone have actively traded in such an environment.

The lack of first-hand experience of spiralling prices might explain the current conventional wisdom. The prevailing opinion appears to be that inflation is going away in two to three years. This optimistic scenario unfortunately appears to be more anchored to hope than reality. Anyone old enough to have lived with skyrocketing interest rates might remember how sticky prices actually were. As the old economic adage goes: once an inflationary tiger is let loose, it is extremely difficult to tame.  What is for sure is that the world's monetary guardians have been caught flatfooted by ri...