By Jeremie Banet and Mihir P. Worah, PIMCO.com
Although a rapid increase in inflation isn’t in most investors minds, the latest piece from PIMCO on inflation is worth a quick read and a healthy reminder things don’t necessarily need to stay the same forever. Full reading here.
- Our baseline inflation outlook does not envision a rapid acceleration over the secular horizon, but we see greater inflation risk than in recent years given tight labor markets, late-cycle fiscal expansion, and rising populism.
- We believe many investors have adequately prepared their portfolios for a slowdown in growth but may be underestimating the possibility of a longer-term inflation surprise.
- These investors could potentially benefit from allocations to real assets, such as inflation-linked bonds, commodities and real estate investment trusts (REITs), to better hedge their portfolios and potentially enhance returns if an inflationary regime were to emerge.