Inflation Assets and Deflation Assets In order to mitigate inflation risks, should investors increase their allocation to inflation assets and decrease their exposure to deflation assets in their portfolio? Image: BofA Global Investment Strategy
Deflation Assets vs. Inflation Assets Is the 40-year bull market in bonds over? Deflation Assets: government bonds, U.S. investment grade, S&P 500, U.S. consumer discretionary, growth and US high yield.Inflation Assets: TIPS, EAFE, U.S. banks, value and cash. Image: BofA Global Investment Strategy
Deflation Assets and Inflation Assets Deflation assets outperformed inflation assets 3 out of past 15 years. Image: BofA Global Investment Strategy
Fed Deflation Probability (Inflation Below Zero) This chart suggests the high probability that the U.S. inflation rate will fall below zero over the next 12 months.
Inflation Assets vs. Deflation Assets The leadership remains deflationary, and the laggards remain inflationary. Deflation assets: government bonds, U.S. investment grade, S&P 500, U.S. consumer discretionary, growth and US high yield. Inflation assets: TIPS, EAFE, U.S. banks, value and cash. Image: BofA Global Investment Strategy
The Performance of “Deflation Assets” vs. “Inflation Assets” Interesting chart showing the performance of “Deflation Asset” vs. “Inflation Assets” since 1960. “Deflation Assets”: Government Bonds, US Investment Grade, S&P 500, US Consumer Discretionary, Growth and US High Yield “Inflation Assets”: TIPS, EAFE, US Banks, Value and Cash Image: BofA Merrill Lynch
Is Inflation Dead? Deflation Fears Make A Comeback Is deflation on the horizon? Investors expect inflation running below 1.5% YoY for the next three years. Image: Arbor Research & Trading
Market – Biotech ETF vs. Energy ETF (Price Relative) Will the rotation from inflation to deflation assets continue? Image: BofA Global Investment Strategy
Market – Biotech ETF vs. Real Estate ETF Price Relative How could investors determine a market reversal? Watch biotech (deflation) to print low vs. real estate (inflation). Image: BofA Global Investment Strategy
Valuation and Inflation Investors in equities should fear too much inflation and deflation, as the sweet spot for inflation is about 2% per year. Image: Fidelity Investments