There is no doubt about it – inflation is on the rise. Factors such as the Russia-Ukraine conflict, de-globalization, and climate change make once-transitory price increases appear more durable.
Ironically, that means inflation is no longer the deciding factor for asset allocation – it’s a given. Instead, we are focused on whether economic growth can keep up.
We expect it will, which drives our modest overweight to risk assets. And, while we are turning more defensive in our equity portfolios, we assert that it is too early to be defensive in fixed income. Traditional “safe haven” asset classes such as core bonds and cash can create a significant drag on a portfolio, especially when inflation is so high.
Our latest investment outlook dives deeper into this view, and resulting actionable investment ideas. For investors with a more cautious view, we share an alternative allocation.