Deflation Assets vs. Inflation Assets The leadership is still deflationary, and the laggards are 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
Money Supply and Inflation Aging is inflationary when caused by a decline in birth rate, and deflationary when caused by an increase in longevity. If the money supply grows faster than real output, then it causes inflation. And if there is a structural bottom for commodities and inflation, value could outperform growth. Image: Fidelity Investments
Growth and Inflation This chart shows the ISM Index vs. prices paid deviation from the mean since 2009. Currently, the U.S. manufacturing cycle has headed back into recession & deflation. Image: Fidelity Investments
Why Do Eurozone Bond Investors Accept Zero Long-Term Interest Rates? Because they have a deflationary view of the euro area economy. Now, investors are losing so much money just by holding German bonds in real terms (adjusted for inflation). Today, the Germany 10-Year bond yield hits 0% again. Keep in mind that raising interest rates in…