In his latest Bloomberg Opinion column, John Authers references Absolute Strategy Research’s 2024Q4 Asset Allocation Survey, drawing attention to growing US inflation concerns amongst investors.
The Last Step Is the Hardest
US inflation continues to stay irritatingly above the 2% target. This doesn’t oblige the Fed to start hiking, although the expectation is now for a maximum of one more cut to the fed funds rate in the next two Federal Open Market Committee meetings. Investors are now very much alive to the disquieting risk that inflation still hasn’t been beaten, just as a new government prepares a barrage of policies that should at the margin be inflationary. Absolute Strategy Research’s latest quarterly survey of asset allocators shows that a majority of global money managers now expect US inflation to rise over the next 12 months, not fall:
Source: ASR Ltd./ LSEG Datastream
Trump has a mandate for tariffs, corporate tax cuts, and an immigration crackdown; but everyone knows that the electorate will not tolerate a fresh wave of inflation. It’s not yet clear how severe the trade-off between policy aims and inflation will be, nor how the administration will deal with it, but it’s by far the greatest “known unknown” risk. Until it arrives, the trade is to keep buying American assets. That’s certainly what the money managers interviewed by Absolute Strategy seem intent on doing:
Source: ASR Ltd./ LSEG Datastream
Authers' article serves as a crucial reminder of the complex and evolving nature of inflation and its significant influence on investment strategies globally. Absolute Strategy Research’s survey provides valuable insights into how leading asset managers are adjusting their expectations and positioning their portfolios in response to these macroeconomic trends.
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