Suny Park, Head of Institutional Client Strategy, explores inflation-hedging assets institutional investors may consider in preparation for the end of the Great Moderation.

Key takeaways

  • The Great Moderation – a period of subdued inflation and business cycle volatility as we know it – may be coming to an end.
  • As witnessed during the early and the late 1970s, high inflation can wreak havoc on both equities and bonds. Unfortunately, most institutional portfolios, as currently structured, are not positioned to weather coincident losses in stocks and bonds due to high inflation.
  • Our research indicates, inflation-hedging assets or strategies such as REITs, natural resources, and trend-following strategies may provide portfolio protection should the current bout of high inflation persist well into 2022.