Talking Point  

Clients will need to think differently if higher inflation comes

Clients will need to think differently if higher inflation comes

Asset prices can continue to rise even in a world of much higher inflation, but the winners of the past decade may not be the winners of the next decade, according to Remi Olu-Pitan, multi-asset investor at Schroders.

Speaking on the FTAdviser podcast, Olu-Pitan noted: “The high probability now is that we do get higher inflation, but it's difficult to know which assets would perform best, due to the unprecedented nature of events in the world.

"But that doesn’t mean asset prices have to fall. We think investors might have to be more discerning than in the past. We like real assets in that climate, commodities would be expected to do well.

"Fixed income would struggle and so would those equities that act like bonds, many of which have performed well in recent years.”

Chris Darbyshire, chief investment officer at Walker Crips Investment Management, said many of the deflationary forces in the world continue to exist, creating a lot of uncertainty around the outlook for inflation.

He added that there are far more asset classes now than was the case during previous periods of higher inflation in the UK, with the consequence that one cannot be as certain this time about how particular asset classes will perform. 

Charlie Parker, managing director at Albemarle Street Partners, said while there is ample data available to advisers to indicate how asset classes perform in a world of higher inflation, what might be the case next time is that investors, unused to even modestly higher inflation, sell off certain assets more quickly. 

Listen to the full podcast above. 

david.thorpe@ft.com