A potential game-changer

A monetary regime change is a potential game-changer for investors, who may need different ways to manage risk. In particular, it presents a challenge in terms of how to structure a traditional equity-dominated multi-asset portfolio.

What’s in the paper?

In this paper we address the issue of inflation, what it may mean for financial markets, and how charity investors could look to navigate such an environment.
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Background

A backdrop of economies starting to reopen at a time when they are awash with stimulus has inevitably sparked concerns that inflation will rise. As economies open up, it is anticipated that inflation will look significantly higher than during 2020, when lockdowns stalled demand.

However, what remains less certain, and has become the primary debate among investors, is whether this spike will prove transitory or become more permanent, amounting in effect to a regime change.

A more inflationary environment over the medium term is likely to have profound implications in terms of how different asset classes behave and are correlated, and this will have repercussions for the way investment strategies are constructed.

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.