Inflation Risk

As the global vaccine rollout proceeds and the post-pandemic economy recovery story gets nearer, the global market narrative about rising inflation and the risk of the U.S. economy overheating turned more mainstream.

- Rainer Michael Preiss

Bank of America recently created headlines with its warning about the risk of transitory hyperinflation.

As stewards of capital and investment portfolios, the essential question fund managers face today is whether the 40-year trend of disinflation has ended in 2021?

In my view, the inflation trade is arguably the most significant decision you have to make concerning your portfolio for the next 10 to 20 years.

Year-on-year inflation in May remained lower than Bank Negara Indonesia central bank's target of 2%, though economists expect inflation growth to pick up soon.

If you've got any 10- to 20-year investment horizon now, the downside is that you don't adjust. Your risk is that you don't adjust for inflation, especially when traditional fixed income is increasingly return-free risk and cryptocurrencies like bitcoin make new record highs.