Zu At the beginning of the investment year 2021, investors focus on the risk of rising inflation. The background is global economic upheaval, coupled with the extremely expansive monetary policy of international central banks and exacerbated by the corona pandemic.
The economist Robert Baur sees a strong likelihood of somewhat higher inflation from 2022 or later. “That would end the 39 year long downward trend for long-term interest rates and would be a risk for stocks and bonds,” writes the chief economist of the fund company Principal Global Investors in an outlook published on Tuesday.
Rising prices would turn the trend and create a fairly new situation in the markets. Because, according to Baur, globalization has caused disinflation for four decades since the opening of world trade in the 1980s, i.e. for a long period of time with a greatly reduced rate of inflation.
This can be explained, for example, by the fact that, thanks to globalization, consumers in industrialized countries were able to buy cheap goods from emerging and developing countries. Should the pandemic weaken globalization, that could also mean an end to weak inflation.
Real estate, farmland and raw materials
The gigantic economic stimulus programs that governments all over the world have launched against the crisis could also cause prices to rise more rapidly. Fueled by government aid and cheap central bank money, demand could rise faster than supply. In the industrialized countries, with their relatively old populations, there is also the fact that an increasing number of high-demand pensioners is faced with a decreasing number of productive employees.
One possible reaction to rising prices would be rising interest rates, which could herald an end to the extremely favorable financing conditions. Should inflation turn out to be stronger than most analysts expected in the short term, real assets could win the race for the best performance in 2021. This includes Baur commercial and residential real estate, arable land and raw materials. Baur recommends that shareholders not overweight tech and growth stocks. In contrast, small listed companies are still attractively valued.