Key takeaways:
- Deglobalisation is reversing some of the competitive forces that helped suppress inflation for decades, potentially creating an environment where pricing power becomes a more important determinant of corporate success.
- From an investment perspective, higher structural inflation may favour businesses with the ability to raise prices, resilient borrowers with strong cash flows, and areas where capital remains scarce.
- An active approach is increasingly important because inflationary pressures are unlikely to affect all companies equally, making disciplined fundamental analysis critical in distinguishing durable winners from temporary beneficiaries.
When insights are shared across investment teams, at times clear signals can emerge. Our High-Conviction Views series highlights ideas where alignment across macro, fundamental, and portfolio research points to a potentially compelling opportunity or theme.
Our first report in the series, The time for short-duration bonds, argued that deglobalisation, challenging demographics, and deteriorating fiscal positions were likely to produce a more inflationary and volatile environment. We believe the return of corporate pricing power provides further evidence that this inflationary regime change is already under way.
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