net_left adver left

Analysis-Here to stay: fund managers play the long game on inflation

Wednesday, July 27, 2022
Analysis-Here to stay: fund managers play the long game on inflation © Reuters. FILE PHOTO: The Charging Bull or Wall Street Bull is pictured in the Manhattan borough of New York City, New York, U.S., January 16, 2019. REUTERS/Carlo Allegri/File Photo

By Yoruk Bahceli and Sujata Rao

AMSTERDAM/LONDON (Reuters) - Not convinced by central banks' pledge to stamp on inflation, many investors are on the hunt for assets that will protect their portfolios from years of decline in the value of money.

These funds are buying up inflation-linked bonds and real estate, while also taking long-term bets on the outperformance of stocks, including those in industries like timber and farmland.

"The new game in town is to preserve the purchasing power of the portfolio," said Pascal Blanque, head of the investment institute at Amundi, Europe's largest fund manager, referring to the hunt for assets that deliver returns matching or surpassing inflation.

The resurgence of inflation, after a long hiatus, has caught central bankers off guard.

The Federal Reserve on Wednesday is likely to hike rates by another 0.75% to a range of between 2.25% and 2.5%, the highest since 2019. Fed Chairman Jerome Powell is expected to reassert the bank's determination to return inflation to target even if it means recession.

Policymakers are on the right track, if markets are to be believed. Market-based inflation gauges are falling towards central bank targets and 60-odd basis points has been shaved off peak Fed rate pricing for this cycle..

Long-term euro zone inflation expectations have also fallen back since May.

Yet many investors are bracing for a prolonged period of "sticky" inflation, somewhat akin to the 1970s era of low growth and rising prices, and do not expect inflation to slow towards the 2% levels targeted by central banks.

BofA's latest monthly survey found sticky inflation was the biggest fear among fund managers running $800 billion in assets.

NO VOLCKER

Those fears are primarily driven by two factors.

First, that central banks will run up against the inflationary effects of tight commodity and jobs markets, and the mounting costs of switching to a greener global economy, which conventional monetary policy can do less to counter.

The other problem may be central banks themselves.

With inflation more than four times target, it is hard not look back to Paul Volcker the Fed chairman who raised rates to 20% in the 1980s, plunging the economy into recession but slaying double-digit inflation.

Few think central banks today share Volcker's inflation-killing resolve, or can disregard the hit to economies especially as current explosive debt levels make it tough for borrowers to stomach sharply higher rates.

"Inflation will be much more persistent than markets are pricing ... because the Fed wont see (the rate hikes) through," said BlackRock (NYSE:BLK) Investment Institute's deputy head Alex Brazier.

A former member of the Bank of England's financial policy committee, Brazier expects the Fed to raise rates to 3.5%, but a sharp growth slowdown would evoke "a more nuanced response".

The result will be 5%-plus inflation next year and above 3% in 2024, he predicts, well above the 2.6% and 2.2% Fed median forecasts of the personal consumption expenditure price index.

That view underpins BlackRock's longer-term recommendation for equities over government bonds, with a firm "underweight" for longer-maturity debt because investors will want more compensation for inflation.

Jim Reid, Deutsche Bank (ETR:DBKGn)'s head of global fundamental credit strategy, reckons the Fed will stop hiking before they raise rates to "restrictive" territory of 5% necessary to cool inflation, leaving "unfinished inflationary business".

NO EASY MONEY

However investors choose to protect themselves from higher inflation, stubbornly high price growth will likely make it harder to deliver returns than the easy-money period of the past two decades when inflation was low and predictable.

Chris Jeffery, head of rates and inflation strategy at Legal and General Investment Management, expects U.S. core inflation at 4% next year.

Aside from property, he is buying stocks exposed to timber and farmland and Treasury Inflation-Protected Securities (TIPS), following the recent pullback in inflation expectations.

"You don't need to overcomplicate this too much. If you’re looking to protect from inflation, TIPS are no longer eyewateringly expensive," Jeffery said.

Some of the assets that performed strongly in the 1970s are shining this year.

A Deutsche Bank study said gold, silver and oil won out in the 1970s, with average annual inflation-adjusted returns around 20%, followed by property, aluminium, nickel, corn, soybeans and wheat.

BofA's latest monthly survey showed "long" commodities and energy are the second-most popular trades in July.

Deutsche Bank's Reid said stock and bond index outperformance in recent years was predicated on low and stable inflation, but such price stability no longer exists.

Deutsche's study noted real losses of around 1% annually on the S&P 500 through the 1970s.

"If you believe that era (of low inflation) is reversing, it's very difficult to see financial assets doing well in aggregate," Reid added.

Leave your comment
HOT AUTO TRADE BOT SOFTWARE adver right
APPROVED BROKERS
net_home_top HOT AUTO TRADE BOT SOFTWARE
13-08-2022 16:21:31 (UTC+7)

EUR/USD

1.0261

-0.0056 (-0.54%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (6)

Sell (2)

EUR/USD

1.0261

-0.0056 (-0.54%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (6)

Sell (2)

GBP/USD

1.2135

-0.0076 (-0.63%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (3)

Sell (5)

USD/JPY

133.46

+0.46 (+0.34%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

AUD/USD

0.7121

+0.0016 (+0.23%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (3)

Sell (6)

USD/CAD

1.2774

+0.0013 (+0.10%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (8)

Sell (0)

EUR/JPY

136.93

-0.29 (-0.21%)

Summary

Sell

Moving Avg:

Buy (1)

Sell (11)

Indicators:

Buy (3)

Sell (3)

EUR/CHF

0.9659

-0.0046 (-0.48%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (3)

Gold Futures

1,818.40

+11.20 (+0.62%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (9)

Sell (0)

Silver Futures

20.835

+0.486 (+2.39%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

Copper Futures

3.6783

-0.0282 (-0.76%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (0)

Crude Oil WTI Futures

91.88

-2.46 (-2.61%)

Summary

↑ Buy

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (8)

Sell (0)

Brent Oil Futures

98.01

-1.59 (-1.60%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (5)

Sell (1)

Natural Gas Futures

8.780

-0.094 (-1.06%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

US Coffee C Futures

227.53

+3.58 (+1.60%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (1)

Euro Stoxx 50

3,776.81

+19.76 (+0.53%)

Summary

Sell

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (2)

Sell (6)

S&P 500

4,280.15

+72.88 (+1.73%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

DAX

13,795.85

+101.34 (+0.74%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (2)

Sell (4)

FTSE 100

7,500.89

+34.98 (+0.47%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (3)

Sell (2)

Hang Seng

20,175.62

+93.19 (+0.46%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (1)

US Small Cap 2000

2,013.09

+37.84 (+1.92%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (0)

IBEX 35

8,400.40

+20.40 (+0.24%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (6)

BASF SE NA O.N.

44.155

+0.730 (+1.68%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (6)

Sell (2)

Bayer AG NA

54.15

+2.47 (+4.78%)

Summary

↑ Buy

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (9)

Sell (0)

Allianz SE VNA O.N.

181.08

+2.08 (+1.16%)

Summary

↑ Sell

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (3)

Sell (6)

Adidas AG

173.20

+1.18 (+0.69%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

Deutsche Lufthansa AG

6.588

+0.062 (+0.95%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (6)

Siemens AG Class N

111.84

+1.92 (+1.75%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

Deutsche Bank AG

9.061

+0.197 (+2.22%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (0)

 EUR/USD1.0261↑ Buy
 GBP/USD1.2135↑ Sell
 USD/JPY133.46↑ Sell
 AUD/USD0.7121↑ Sell
 USD/CAD1.2774↑ Buy
 EUR/JPY136.93Sell
 EUR/CHF0.9659↑ Sell
 Gold1,818.40↑ Buy
 Silver20.835↑ Buy
 Copper3.6783↑ Buy
 Crude Oil WTI91.88↑ Buy
 Brent Oil98.01Buy
 Natural Gas8.780↑ Buy
 US Coffee C227.53↑ Buy
 Euro Stoxx 503,776.81Sell
 S&P 5004,280.15↑ Buy
 DAX13,795.85Neutral
 FTSE 1007,500.89Neutral
 Hang Seng20,175.62↑ Buy
 Small Cap 20002,013.09↑ Buy
 IBEX 358,400.40↑ Sell
 BASF44.155↑ Buy
 Bayer54.15↑ Buy
 Allianz181.08↑ Sell
 Adidas173.20↑ Buy
 Lufthansa6.588↑ Sell
 Siemens AG111.84↑ Sell
 Deutsche Bank AG9.061↑ Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank6,620/ 6,720
(0/ 0) # 1,655
SJC HCM6,660/ 6,760
(30/ 30) # 1,651
SJC Hanoi6,660/ 6,762
(30/ 30) # 1,653
SJC Danang6,660/ 6,762
(30/ 30) # 1,653
SJC Nhatrang6,660/ 6,762
(30/ 30) # 1,653
SJC Cantho6,660/ 6,762
(30/ 30) # 1,653
Cập nhật 13-08-2022 16:21:33
Xem lịch sử giá vàng SJC: nhấn đây!
ↀ Giá vàng thế giới
$1,801.89+12.740.71%
Live 24 hour Gold Chart
ʘ Giá bán lẻ xăng dầu
Sản phẩmVùng 1Vùng 2
RON 95-V25.34025.840
RON 95-III24.66025.150
E5 RON 92-II23.72024.190
DO 0.05S22.90023.350
DO 0,001S-V24.88025.370
Dầu hỏa 2-K23.32023.780
ↂ Giá dầu thô thế giới
WTI$91.88+0.550.60%
Brent$97.89+0.110.11%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD23.220,0023.530,00
EUR23.498,0024.813,92
GBP27.761,8728.945,83
JPY170,70180,72
KRW15,5018,89
Cập nhật lúc 16:19:15 13/08/2022
Xem bảng tỷ giá hối đoái
adver main right