60 seconds on switching investments to reflect rising inflation

In this video, Marcus Brookes discusses how different assets might find favour as inflation rises.

8 June 2017

Marcus Brookes

Marcus Brookes

Head of Multi-Manager

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.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.