Inflationary landscape leaves much to consider
By
Jonathan Armitage
25 May 2021
I first mentioned the topic of inflation in 2020 and I am aware that raising the subject of inflation, in the middle of a pandemic that crunched economic activity, may have seemed a touch unusual. However, there’s now growing investment industry recognition that inflationary pressures are on the upswing and the world’s long holiday from destructive inflation, which dates to the 1980s, appears to be winding down.
This has important bond and sharemarket implications and thus for investors’ portfolios. Let me begin with the bond market.
Complicating assessments of how bond markets may behave should higher inflation emerge is the realisation that “price discovery” – the process by which market prices adjust in response to information changes – has been absent from the bond market for some time.