Invest
Don’t be complacent on US inflation, investors warned
A sustained recovery in the oil price could see US inflation overshoot to the upside – a tail risk that neither the bond, currency nor equity markets are prepared for, according to one asset manager.
Don’t be complacent on US inflation, investors warned
A sustained recovery in the oil price could see US inflation overshoot to the upside – a tail risk that neither the bond, currency nor equity markets are prepared for, according to one asset manager.
In his monthly Multi-Asset Brief, Investec co-head of multi-asset Philip Saunders warned investors not to be too complacent about US inflation.
External inputs such as the price of oil have had a significant negative impact on US inflation readings for the past 18 to 24 months, Mr Saunders said.
“What is of greater interest is the extent to which these transient factors have been implicitly priced into future estimates for inflation, and that the more persistent drivers of inflation – which have been operating in a more normal fashion – have been largely overlooked,” he said.
Assuming that non-energy elements of the US consumer price index (CPI) are at “historically normal” levels, inflation expectations are so low that they imply the oil price will reach zero by 2019 – a “wholly unrealistic assumption in itself”, Mr Saunders said.
Investec has modelled five potential inflation scenarios, which consider a range of oil prices by year end.
“While the central case is that inflation rates remain well contained, it is naïve to ignore the potential risk that the market could be surprised by higher inflation rates,” Mr Saunders said.
“Our models suggest inflation and wages will be firm going forward and our commodity team believes that robust oil demand and a material decline in oil supply will provide support to the oil price."
He added: “If there is a more sustained oil price recovery, consistent with our commodity team’s forecast of approximately US$60 per barrel, there is a meaningful risk that inflation could even overshoot to the upside.
“This is a tail risk that neither the bond, currency or equity markets are prepared for.”
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
Property
Could changing tax law boost regional property prices?
Property investors are urging the Australian government to change tax deductions for travel expenses related to their investment property as a way to stimulate the regional housing market. ...Read more
Property
The importance of statistical weighting in property data
Investors are being urged to deep dive into the data, with statistical weighting likely to show property nationally has fallen despite many regions still performing strongly, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
Property
Could changing tax law boost regional property prices?
Property investors are urging the Australian government to change tax deductions for travel expenses related to their investment property as a way to stimulate the regional housing market. ...Read more
Property
The importance of statistical weighting in property data
Investors are being urged to deep dive into the data, with statistical weighting likely to show property nationally has fallen despite many regions still performing strongly, according to research. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
