通膨底下, 投資策略

 

Not ‘automatically’ bad for equities

So how long will inflation pressures persist? Anyone making projections should do so with a large sense of humility given the largely unprecedented nature of the post-pandemic restart, Boivin prefaced, saying it would be reasonable to expect high inflation to persist through the first half and perhaps into the second half of 2022.

 

It’s more important, he said, to recognize the “nature” of the current inflation rise than the time frame. Inflation is likely to remain well above target in 2022 and will remain above target, on average, over the next five years, Boivin said.

 

For investors, that’s not a bond-friendly environment, he said, with the BlackRock Investment Institute favoring inflation-protected securities over nominal bonds. It’s not an environment that’s “automatically” bad for equities or other risk assets however, “which leaves us net-net underweight government bonds but overweight global equities” as investors see some inflation with a muted policy response.

Fidelity sector strategist Denise Chisholm has looked at previous periods of stagflation and says history provides an ambiguous guide for investing when growth is weak and inflation high. Defensive stock sectors such as consumer staples and health care have historically performed well in recessions but less so when growth has been merely slow. Similarly, while technology has benefited from low inflation, it hasn't done badly when inflation has risen. That history suggests that the best approach is to be diversified and remember that inflation by itself is not necessarily a bad thing for stocks.

 

As Pineault says, "The price of a stock reflects how profitable a company is and if you have inflation, revenue can be higher. That means stocks typically are the most effective hedge against inflation."

 

With that in mind, this may be a good time to put some Doobie Brothers or Captain and Tennille on the 8-track player and review your asset allocation.