Not all inflationistas wear flares – The Property Chronicle
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Not all inflationistas wear flares

The Fund Manager

Investors have divided into two camps. Those who believe inflation will subside and the rise in prices will prove temporary, and others who fear we are entering a period of high sustained inflation reminiscent of the 1970s.

Source: Office of National Statistics, data to 31 October 2021

We consider both scenarios unlikely.

Overlay the bottom chart on the top and you would be forgiven for believing that we are now on the same trajectory as we were 50 years ago. There are parallels, but to assume the economy will meet the same inflationary fate would be a grave mistake for investors.

We believe we are entering a new inflationary era. But, unlike the 1970s, it won’t be marked out by shockingly high inflation rates. Instead, investors will confront a world of inflation volatility. In this environment, the gap between interest rates and headline inflation will widen – creating a dangerous chasm known as negative real yields.

The Fund Manager

About Hermione Davies

Hermione Davies is Investment Director at Ruffer. Previously Managing Director of Bessemer Group (UK), she was Chief Investment Officer of the group’s non–US investments. She graduated from Oxford and started her career at NatWest Bank prior to becoming a fund manager of a Japanese-Pacific Unit Trust at Guinness Mahon & Co.

Articles by Hermione Davies

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