Investment in assets seen as inflation-proof will rise

Significance

Traditionally, a balanced portfolio mix of 60% stocks against 40% bonds and cash offered investors some protection against inflation. However, recent periods when equities and bonds have fallen in tandem have encouraged investors to assess other assets' resilience to inflation.

Impacts

• Demand for different inflation hedges will vary according to investors’ timeframes and risk tolerances.
• While rising inflation can affect the purchasing power of assets, an offsetting positive is that it can also reduce the real value of debt.
• If inflation eases faster than expected this year, demand for inflation hedges will fall.