By Matthew Kerkhoff
Inflation, and perhaps more specifically, inflation expectations, sit at the core of our financial markets. Like the sun’s rays, they radiate out influence across the rest of the financial universe.
Fears of deflation have prompted central banks around the world to employ the easiest monetary policies the global economy has ever seen. In the recent past, nearly every central banks’ attempt to tighten conditions has been thwarted by the prospect of disinflation or downright deflation.
For investors, choosing between the inflation camp and the deflation camp is one of the most critical and fundamental decisions that must be made, because it dictates what asset classes to focus on. If you believe deflation is ahead, you’re likely to stay away from things like stocks, gold, and real estate, favoring cash and perhaps items such as bonds, whose prices move higher when interest rates fall.
On the other hand, if you’re in the inflation ... Log in or subscribe to continue reading.