Inflation fears may be inflated

Oct 21, 2020 | Jay Zhang


Fears in the U.S. around inflation have been more persistent than actual inflation, and that remains the case as U.S. data continues to point to little inflation in the pipeline.


Away from the ongoing concerns about the stalemate over a second fiscal stimulus package in the U.S., and rising COVID-19 cases globally that are driving another round of targeted lockdowns, risks and concerns around inflation remain the one constant that is seemingly front and center in the minds of investors. Despite a decade-plus of below-par inflation around much of the world, rising deficits, enormous numbers around fiscal spending, and efforts by central banks may rightly justify such fears, but we maintain our view that inflation is not a near- or intermediate-term problem for fixed income investors.

And perhaps these fears are only amplified by global yields that remain near historically low levels. The margin for error is simply lower than it ever has been as it doesn’t take much in the way of inflation to begin eating away at those returns. There are other forces at work in this world In the U.S., this week saw the release of a wide swath of price data from consumers to producers, along with qualitative surveys on pricing pressures, with the key takeaway being that there simply doesn’t appear to be inflationary forces in the pipeline.



Market pulse
3 U.S. markets flat as earnings season begins
3 Canada adds 378,000 jobs in September
4 European economies face new virus measures
4 Hong Kong and Singapore to launch a “travel bubble”


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