Patricia Croft, Vice-president and Chief Economist with Phillips, Hagar & North Investment Management has just been posted online at www.cirdebates.com.
Croft says that inflation is a non-issue, for now. That the next 3-5 years could bring about a sea of change in inflation expectations as developed economies struggle to rein in massive sovereign debt levels.
She thinks investors should consider, in the near term, excess capacity in developed economies should restrain upward pressure on the core or underlying rate of inflation.
Croft commented on how growth will not bring finances on side, as growth rates are likely to be inhibited by high debt levels. Deflation is also possible over the medium-term but the odds of this scenario are considerably lower in terms of unfolding due to the vigorous policy response we’ve seen to avoid this outcome.
“If inflation were to return,” she said, “the experience of the 1970s suggests commodities and real estate will outperform stocks and bonds and investors should consider buying inflation protection. A deflationary portfolio would be biased towards bonds and away from stocks, real estate and commodities.”
To view Croft’s full analysis, join the debate.