Pay attention to commodities in an inflationary environment
As the demographic structure of inflation in developed markets may be shifting, exposure to commodities in portfolios will aid diversification
Add BT as a preferred source
MARKETS are governed by cycles. In financial media, almost all the attention is given to shorter-term cycles. The longer cycles are usually not analysed in any detail, with the common assumption being that the most recent trend will continue.
Most people in the financial industry today have never experienced an inflationary boom nor an inflationary bust. The last time we sustained high inflation was in the late 1970s. Since then, it has been one big disinflationary cycle that led to a bull market in both equities (price-earnings multiples rose in the last four decades from single digits to the current 28 times) and bonds (interest rates dropped from 20 per cent to their lowest point of zero per cent).
Buying ultra-long dated US government treasuries in 1980 would have yielded a return similar to equities.
TRENDING NOW
On the board but frozen out: The Taib family feud tearing Sarawak construction giant apart
Thai and Vietnamese farmers may stop planting rice because of the Iran war. Here’s why
PayPal plans job cuts as its new CEO pursues turnaround strategy
MAS, bank CEOs convene over AI cyberthreats; boards told to own risks, not leave to IT teams
