The disinflationary trend in the official consumer price index data is quite evident and our proprietary work strongly suggests that this “great unwinding” will continue at least through next year. We looked back at 50 years’ worth of data and found that all roads lead to bonds over stocks and, within the equity market, a sector orientation toward those areas that benefit from disinflation.
The disinflationary trend in the official consumer price index data is quite evident and our proprietary work strongly suggests that this “great unwinding” will continue at least through next year.
So, how should investors be positioned? We looked back at 50 years’ worth of data and found that all roads lead to bonds over stocks and, within the equity market, a sector orientation toward those areas that benefit from disinflation and We went back to all disinflationary cycles over the past five decades to gauge how various asset classes perform in a deflationary environment. Our results are shown in the accompanying table, presented on a median basis with the percentage changes reported point to point (non-annualized). The reasons are twofold: they traditionally have large debt loads and benefit from the drop in interest rates (more on this later) that tends to accompany slowing inflation. Moreover, they are defensive in nature, which investors gravitate towards from the lack of a pro-cyclical macro environment that accompanies decelerating price pressure
Disinflation Trend Investors Bonds Stocks Equity Market Deflationary Environment Asset Classes Interest Rates Inflation Defensive Macro Environment Price Pressures
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