How rising inflation in the US and UK, together with economic growth, have created renewed interest in inflation protection
Rising inflation in the US and the UK, together with strong economic growth and a propensity by central banks to let inflation overshoot targets have created renewed interest in inflation protection for portfolios.
This report shows that, in fact, stocks as well as property, infrastructure, and commodity investments still provide good protection against rising inflation expectations.
The ability to hedge effectively against rising inflation increases as investment horizons increase towards three to five years. Investors should thus hold the investments above over a long-term investment horizon, to benefit more fully from their inflation hedging properties.
Property investments, as well as infrastructure investments, provide an additional advantage over commodities due to their reliable income streams that are sometimes linked directly to inflation. Compared to stocks, property and infrastructure investments are less prone to losses in times of declining inflation expectations and deflation.
Overall, investors should consider increasing their allocations to infrastructure and property investments if they want to help protect their portfolios against rising inflation while still generating attractive income and capital returns.
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