60 seconds on switching investments to reflect rising inflation

One of the features of the recovery globally, in the last four or five years, is that we’ve seen some fairly good growth around the world. But we have really seen an absence of the inflation that usually comes alongside it.

Low inflation has skewed returns

I think that has really skewed quite a few of the returns from various different assets around the world.

There has been this concept of “lower for longer” - as in lower inflation, lower growth and therefore lower interest rates - but we’re now in an environment where we’re starting to see the pick-up of inflation. This means that policy may have to change.

You can see that the Federal Reserve has already taken away the quantitative easing programme and now it’s talking about raising rates. It’s already done that a couple of times and there is an expectation that it will continue.

A different portfolio may be needed

I wonder if this is the point where we need to be thinking about a different environment. Rather than “lower for longer”, maybe it is rising a bit sooner.

That may mean a different portfolio. Rather than owning developed markets, maybe emerging markets are the place to be.

Rather than having things that don’t benefit from inflation, maybe you do now need to have something like commodities.

Maybe a different portfolio is needed for a different environment.