Is inflation making a comeback?

Executive summary

Inflation is a pressing topic for many investors. In the latest Fullerton Investment Views, we take a closer look at whether inflation is poised to make a comeback amid rising growth expectations, and the potential implications for risk assets.


  • With commodity prices surging, investors are concerned that inflation could shock on the upside. Meanwhile, bond yields have increased rapidly and equities have fallen.
  • Investors may worry that their real returns could suffer, and the prospect of tighter monetary conditions could threaten equities.
  • Investors’ best protection is a diversified portfolio as most risk assets may potentially provide solid inflation protection with returns much higher than global CPI inflation.
  • The bigger test, over the next few years, is whether developed economies can continue to grow strongly with higher real yields.
  • We believe economies should be able to navigate toward higher interest rates due to credible commitments by global policymakers to give more support if growth slumps; furthermore, economic activity post-COVID seems more resilient without having to heal itself from the painful debt deleveraging of the last 2008-09 crisis.