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Inflation: A Transitory Spike?

Top Papers and Podcasts on Inflationary Environments

The July release of June's U.S. Consumer Price Index data surprised investors, coming in at 5.4%, the largest gain since just before the onset of the Global Financial Crisis. However, this is a year-on-year figure, and 2020 was no ordinary year. As a result, the index suffers from 'base effects' which magnify the current year's figures. Looking into the data even further, price increases within certain sectors dominated others due to supply chain issues, commodity prices, and increased travel demand.  

A reflationary environment seems most likely, and the current consensus is that the spike in inflationary data will prove to be transitory. But the risk of other outcomes is not altogether off the table. The following papers discuss historical inflationary environments and their effects on asset prices, global monetary policy, and the implications of current macroeconomic data.

transitory spike

Transient Inflation: What if the consensus is wrong? (Janus Henderson, Aug 2021)

The Fed has reassured market participants that recent inflation data represents a temporary spike, and fixed income markets have largely accepted this explanation. But what circumstances would have to arise for this consensus to be incorrect?

U.S. Inflation and Global Asset Returns (Dimensional Fund Advisors, 2021)

Dimensional Fund Advisors looks at the relationship between global asset class performance and inflation over multiple time periods, concluding mostly that there is a weak correlation between inflation and nominal asset returns.

Inflation Trends Across Emerging Markets (Franklin Templeton, Jul 2021)

For compliance reasons, this paper is only accessible in the EMEA region

Franklin Templeton looks specifically at inflation trends and the drivers of inflation within emerging markets. They delve into two markets in detail - Indonesia and the Dominican Republic.

The Investment Podcast: Inflation – Is it real? (M&G Investments, Aug 2021)

For compliance reasons, this paper is only accessible in certain geographies

This 27-minute M&G Investments podcast reviews historical inflationary environments from the 'Great Moderation' in the 1980s to the present day. They also review global monetary policy moves and the implications of recent inflation figures.

The Case for Investing in Floating Rate Bank Loans (MetLife IM, Aug 2021)

MetLife Investment Management highlights the benefits of floating-rate bank loans during an economic expansion alongside expectations of rising interest rates.

Assessing Inflation: Theories, policies and portfolios (PIMCO, 2021)

PIMCO explains the differences in index calculations that are used to measure inflation, reviews historical inflationary regimes and inflation theories, and conducts several linear regressions on asset prices during inflationary surprises or other changes in the inflationary environment.

Podcast: Should investors be happy about higher inflation? (Lazard AM, Jul 2021)

In this 28-minute podcast, experts from Lazard Asset Management look at inflation and global monetary policy from a number of different angles.

Global Reflation? (BIS, 2021)

On the heels of recent spikes in inflation in many countries, this paper from the Bank of International Settlements presents several reasons why these increases may be transitory.

Does the Fed Face an Impossible Trinity? (PGIM Fixed Income, Jul 2021)

Chief Economist at PGIM Fixed Income, Nathan Sheets, PhD, describes three equivalently likely inflation scenarios in the U.S. and The Fed’s new Flexible Average Inflation Targeting (FAIT) framework.

Podcast: Inflation? We're not going back to the 1970s (CFA Institute, Aug 2021)

In this 33-minute CFA Institute podcast, Cheryl Smith of Trillium Asset Management is interviewed about U.S. monetary policy, the new flexible average inflation targeting (FAIT) policy, and historical financial crises.

Are Bond Investors too Complacent About Inflation? (Aviva Investors, Aug 2021)

For compliance reasons, this paper is only accessible in certain geographies

Yields on U.S. Treasuries have fallen recently, implying that the bond market doesn't buy into inflationary concerns sparked by CPI data. In this article, Aviva Investors looks at expectations for inflation breakevens and real yields, as well as their implications for multi-asset investors.

Is Inflation Just 'Transitory'? (Franklin Templeton, Aug 2021)

For compliance reasons, this paper is only accessible in the EMEA region

Franklin Templeton's Chief Investment Officer Dr. Sonal Desai discusses components of the June U.S. CPI data and why the bond market appears to be dismissing inflationary concerns.

Dynamic Multi-Asset Approach to Inflation Hedging (S&P Dow Jones Indices, 2021)

S&P Dow Jones Indices looks at inflation sensitivities and constructs a multi-asset index that dynamically adjusts to different inflationary regimes.

The Long and Short of It – Inflation or reflation? (Invesco, Aug 2021)

For compliance reasons, this paper is only accessible in certain geographies

Invesco's base case outcome is a reflationary environment, as central bankers stand ready to normalise monetary policy and vaccines continue to minimise the global coronavirus pandemic. They also discuss base effects within inflation data that could be skewing recent figures.

Video: The Fed Stays Dovish – Do markets believe it yet? (Nuveen, Jul 2021)

Brian Nick summarises the July FOMC meeting, providing clarity on the Fed's dovish monetary policy stance, a potential timeline for QE tapering, and insight into inflation expectations.

Inflation, the Phillips Curve, and the Fed’s Dual Mandate (FRBSL, 2021)

Economists from the U.S. Federal Reserve explain inflation dynamics, the Phillips Curve, FAIT, and other inflation-related concepts in plain English in this short paper.

Webinar: Inflation – Growth or central bank complacency? (Janus Henderson, 2021)

For compliance reasons, this paper is only accessible in the United States and Canada

Janus Henderson presents a panel discussion on inflation dynamics and how macroeconomic factors are currently affecting investment portfolios.

What Works When Inflation Hits? (Man Group, May 2021)

Man Group conducts an analysis of eight different inflationary regimes and their effects on the performance of asset classes.