10 Jun Inflation – why it matters for investment markets
Key Points:
- The shift from high inflation to low inflation has been a key tailwind for investment returns over the last 40 years – in particular it has allowed capital growth in excess of growth in earnings and rents.
- A long-term stabilisation in inflation around central bank targets which is our base case would remove this tailwind but still allow reasonable returns, whereas a sustained break higher in inflation (beyond the current likely transient inflation spike) could start to reverse it.
