Strategic fund managers who can allocate between asset classes and who are not be constrained on which assets they hold, are positioning themselves for inflation.
Bond managers are stating publicly that inflation is not an issue; they would say that wouldn’t they!
But who is right, as they are fundamentally disagreeing?
This economic argument about the level of inflation is significant for investment advisers, as inflation or not has a major impact on the returns from certain asset classes.
Two things have sharpened my thoughts on this
· Why has NS&I decided to pull all their RPI linked investments from the market?
· Why the Bank of England Rate sees no evidence of inflation and the need to take precautionary steps to remove it from the system?
Just maybe there is a little more evidence for the thought, that a little inflation will help UK PLC out of its debt crisis and that the Bank of England has softened their stated objective of keeping inflation within targeted bands of tolerance.
Andrew Sentence on the Monetary Policy Committee thinks rates should rise but so far he is the only voice.
If we knew the answer to the question, investment decisions over the next couple of years would be made a little easier.
