The sustainable investor for a changing world


Inflation: running amok   

After decades of below-target inflation, the world is in unfamiliar territory. Inflation is rampant across much of the world, driven by a perfect storm of excess fiscal stimulus in the US, disrupted labour markets, supply chain bottlenecks induced by the Covid-19 pandemic and, most recently, the war in Ukraine which has increased food and energy prices globally.

While some of these factors should wane, others could persist, leading to the prospect of sustained inflation. 

The consequences

To cool consumer demand and dampen wage demands, central banks are resorting to higher interest rates. Companies may respond to price pressures by adjusting their supply chains and increasing automation. There’s also the possibility of social instability as inflation disproportionately hurts lower income countries and households.




Investment solutions

Against this backdrop, markets look set to have to contend with inflation for the foreseeable future. Investors wanting to protect their portfolios may want to consider some of these ideas.  


Inflation-linked bonds

Over the long run, inflation-linked bonds could outperform nominal government bonds if inflation exceeds expectations.



Loans with adjustable interest rates will be able to adapt more quickly to a rising rate environment.



Multi-asset portfolios can balance the upside potential of equities with the downside protection of bonds.


Thematic funds

Many thematic funds have a growth bias, but defensive thematics can weather rate rises better. Select themes may benefit from longer-term trends with less interest-rate sensitivity.


Value equities

Common value sectors include commodities and financials that generally do well when the yield curve is steepening.

To learn more about how we can help you meet your investment goals, please speak to your client relationship manager.


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