Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.
The 1970s were a memorable time for music, but many consumers and investors alike (at least those old enough to remember) might just as soon forget the economic “stagflation” — that toxic combination of flagging growth and soaring inflation — that plagued much of the decade. Forty-some years later, the specter of stagflation has resurfaced, as COVID-related supply-chain disruptions have persisted longer than expected and have converged with expansionary government policy (both monetary and fiscal) to push global inflation meaningfully higher in recent months.
As of this writing, the core Consumer Price Index (CPI) had reached levels well above its 20-year average range, even as GDP growth and many other leading economic indicators had weakened. Rising wages and energy prices have poured fuel on the fire, helping to create those unwelcome echoes of the 1970s — which, not surprisingly, were marked by generally poor real investment returns for…
After a lengthy absence, inflation has finally returned to the US, but for how long depends on who you ask. Many observers, including the US Federal Reserve (Fed), continue to expect today’s inflationary pressures to be more or less “transitory” in nature. Market pricing suggests that many investors share that belief.
However, here are five reasons why I believe US inflation could prove to be far more enduring than widely expected by the Fed and market participants.
Every quarter, the Wisdom of Wellington team surveys around 100 of our Wellington colleagues across different investment disciplines and locations to get their views on what we see as the key macro questions of the day. The results can pinpoint where the firm’s views differ from the consensus and can also reveal important shifts in our collective thinking.
Given the recent minor growth scare in July when bond yields fell, we wanted to see what our survey respondents thought about where we are in the cycle. As Figure 1 shows, the consensus forecast from our survey is that the next 12 months will be the mid-cycle phase. Interestingly, however, the second most likely phase was considered to be…
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