The risk of too little inflation

BlackRock
Door juni 25, 2019 07:02

The risk of too little inflation

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Low inflation may sound appealing, but as Russ explains, it has drawbacks for investors.

By any account the U.S. equity market is having a stellar year. Stocks have benefited from easier financial conditions, which have in turn pushed up market multiples. By a happy coincidence, gains in market multiples have exactly matched the 15% gain in the S&P 500 Index.

But while stocks have benefited from cheap money and higher multiples, they have more recently been constrained by concerns over growth. The challenge is that the same slowdown that led the Federal Reserve to pivot and stop raising rates also puts earnings at risk. Recent developments in the inflation-linked bond market (i.e., Treasury Inflation Protected Securities, or TIPS) suggest that investors are right to be a bit more cautious.

Inflation expectations embedded in the TIPS market are signaling that already low inflation will fall even lower. In late April, the

BlackRock
Door juni 25, 2019 07:02

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