This session takes an indepth look at an issue being discussed around every investment table… inflation.
It looks at whether inflation risk exists and how different asset classes behave in inflation regimes. It asks whether inflation is entirely negative for portfolios and under which scenarios inflation is desirable and controllable. It questions whether there is a new relationship between growth and inflation, or whether historic patterns will prevail and, if so, which ones.
Click here to view Patrick’s presentation slides[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Patrick%20Zweifel%22%2C%22job_role%22%3A%22Chief%20economist%2C%20Pictet%20Asset%20Management%20(Switzerland)%22%2C%22content%22%3A%22With%20over%20two%20decades%20of%20experience%20at%20Pictet%2C%20Zweifel%20has%20been%20crucial%20in%20building%20the%20firm%E2%80%99s%20macroeconomic%20research%20capabilities.%20At%20Pictet%20Asset%20Management%2C%20he%20leads%20a%20team%20of%20four%20economists.%20Zweifel%20plays%20a%20key%20role%20producing%20research%20that%20helps%20shape%20the%20global%20investment%20strategy%20of%20the%20firm%20and%20which%20is%20fundamental%20to%20the%20investment%20decisions%20of%20fund%20managers.%20His%20analysis%20helps%20identify%20structural%20imbalances%20and%20business%20cycle%20turning%20points%20through%20the%20use%20of%20proprietary%20quantitative%20models%20and%20leading%20indicators%20on%20activity%20and%20inflation.%5Cn%5CnZweifel%E2%80%99s%20interest%20for%20emerging%20and%20Asian%20economies%20began%20following%20his%20work%20on%20International%20Economics%20for%20the%20World%20Bank%20and%20for%20the%20European%20Commission%20in%20the%20mid-1990s.%20He%20went%20on%20to%20teach%20econometrics%20and%20monetary%20theory%20at%20HEC%20Lausanne%20and%20HEC%20Gen%C3%A8ve%20until%20he%20joined%20Pictet%20Wealth%20Management%20in%201997%2C%20where%20once%20again%20he%20focused%20on%20emerging%20markets%20and%20currencies%20and%20rose%20to%20head%20of%20macro%20research.%20Zweifel%20then%20joined%20Pictet%20Asset%20Management%20as%20chief%20economist%20in%202009.%20He%20holds%20a%20PhD%20in%20Econometrics%20from%20the%20University%20of%20Lausanne.%22%2C%22image%22%3A%2244163%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fpatrick-zweifel-pam%2F%3ForiginalSubdomain%3Dch%22%7D%5D” title=”Speakers” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20She%20is%20responsible%20for%20directing%20the%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts%2C%20as%20well%20as%20promote%20the%20long-term%20stability%20of%20markets%20and%20sustainable%20retirement%20incomes.%20She%20is%20the%20editor%20of%20conexust1f.flywheelstaging.com%2C%20the%20online%20news%20and%20analysis%20site%20for%20the%20world%E2%80%99s%20largest%20institutional%20investors.%20White%20has%20been%20an%20investment%20journalist%20for%20more%20than%2020%20years%20and%20has%20edited%20industry%20journals%20including%20Investment%20%26%20Technology%2C%20Investor%20Weekly%20and%20MasterFunds%20Quarterly.%20She%20was%20previously%20editorial%20director%20of%20InvestorInfo%20and%20has%20worked%20as%20a%20freelance%20journalist%20for%20the%20Australian%20Financial%20Review%2C%20CFO%2C%20Asset%20and%20Asia%20Asset%20Management.%20She%20has%20a%20Bachelor%20of%20Economics%20from%20Sydney%20University%20and%20a%20Master%20of%20Arts%20in%20Journalism%20from%20the%20University%20of%20Technology%2C%20Sydney.%20She%20was%20previously%20a%20columnist%20for%20the%20Canadian%20publication%2C%20Corporate%20Knights%2C%20which%20is%20distributed%20by%20the%20Globe%20and%20Mail%20and%20The%20Washington%20Post.%20White%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20consists%20of%2022%20fellows%20and%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2235225%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%3ForiginalSubdomain%3Dau%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Inflation is set to rise further but the consequences are not all bad
It is important to distinguish between the two sources of inflation – supply side or demand side and how each feeds into different cycles.
Goods have a much lower share in most inflationary indices compared to services.
Uncertainty about consumption spending could cool inflation as could uncertainty about how much of this spending will be tilted to services.
Avoiding risk assets when growth is low; good inflation hedges include gold and inflation linked bonds.
Inflation can occur in a period of strong or low growth.
Emerging market equities and fixed income (hard and local currency) also offer investors opportunities, performing well in a climate of strong growth and rising inflation.
Investors should look at emerging markets in the context of their own growth, rather than comparing growth to developed markets.
The big difference between the vaccine rollouts and the scale of the stimulus measures across the world could result in a K-shaped global economic recovery, with much of the developed world booming but poorer countries continuing to struggle. However the
Investors discuss how technological change and the new green economy is re-pricing assets in infrastructure, as well as the trend to substitute fixed income with infrastructure debt. But investors should not to lose sight of traditional infrastructure characteristics in their quest to tap new trends. Predictable cashflows and downside protection remain central.
Research that looks at the relationship between economic transparency and defining investment qualities such as yield spreads, credit ratings and stock price volatility shows sovereign transparency helps improve the value of assets, enables countries to lower their borrowing costs and achieve a better credit rating.
Inflation holds investor opportunities as well as perils. Emerging markets, commodities and linkers do well in a climate of rising prices while central banks are likely to act quickly and aggressively in response rather than early or gradually.
The unprecedented level of government debt signals sub-par economic growth ahead, warned Farouki Majeed, chief investment officer, Ohio School Employees Retirement System speaking at FIS Digital alongside Rich Randall, head of global debt at IFM Investors.
Inflation is the number one investor concern and whether it is here to stay was the subject of much debate at the Fiduciary Investors Symposium. While its longevity is contested it was agreed that its presence has important implications for the correlation between bonds and equities which creates problems for portfolio design. Investors at PGIM, QMAW, CPP Investments and NEST discuss.
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