Join Adam Hetts as he speaks to Jim Cielinski, Global Head of Fixed Income, about the direction of inflation and some of the potential pitfalls in traditional “inflation protection” tools.

Key Takeaways

  • Base effects are distorting inflation figures; a permanent rise in inflation likely requires a closing of the output gap and momentum in wage inflation.
  • Treasury Inflation Protected Securities and floating rate securities may solve one type of risk but can open up investors to other underappreciated risks; what’s more investors are not absolved of the need to avoid overpaying.
  • The world may be less synchronised exiting the pandemic, creating potential opportunities for active investors in emerging markets and across the credit spectrum.

Glossary

TIPS: Treasury inflation protected securities are government bonds where the principal value adjusts with inflation.

ABS: Asset backed securities are financial securities that are ‘backed’ by assets, such as loans, credit card debts or leases. They offer investors an opportunity to invest in income-generating assets.

CLO: Collateralised loan obligations are a single security backed by a pool of underlying debt, typically loans issued to corporations.