Invest
Inflation rises tipped to disappoint growth investors
Growth investors are being warned they could be in for a disappointing 2021 as massive government stimulus packages lead to an increase in inflation.
Inflation rises tipped to disappoint growth investors
Growth investors are being warned they could be in for a disappointing 2021 as massive government stimulus packages lead to an increase in inflation.

Two industry experts have warned the recovery from the COVID-19 pandemic is likely to see a lift in inflation, which will negatively impact investors’ returns.
Nucleus Wealth head of investments Damien Klassen said consumer staples and growth stocks are likely to suffer if inflation rises, while value stocks, including travel, banks, cyclical industrials and energy, could outperform.
“While rising inflation expectations were a minor feature in January, February markets reflected higher inflation expectations, and we expect this to continue through the next 12-18 months,” says Mr Klassen in a note to investors.
Magellan’s CIO, Hamish Douglass, also warned investors that the strong world economic recovery could produce a further rise in bond yields and accelerate inflation in the back end of 2021.

“If it is the new inflation coming, the Federal Reserve at some point is going to have to change course and start lifting interest rates. That is a disaster for financial markets… If you raise interest rates abruptly to head off a real inflation threat, hold on to your chairs,” Mr Douglass said.
He added that while the situation was unlikely, a monetary policy-induced inflation was not out of the question.
“The very long-term – is all this printing of money going to lead to a new paradigm and monetary induced inflation in the world? That is a great question that I do not know the answer to… It is very foggy out there,” he said.
While warning of possible inflation rises, Mr Klassen has also pointed to a rise in bad credit with ‘extend and pretend’ replacing the threat of bankruptcy.
“Someone who can’t pay their rent is not evicted but allowed to accrue debt. Don’t foreclose on those who can’t pay their interest. Instead, build up their interest payments into a larger debt burden.
“The end game of this practice will be a cohort of zombie consumers and businesses. Weighed down by debt burdens too massive to ever pay off but supported by interest rates low enough to keep them from defaulting.”
Mr Klassen argues policymakers have decided on ‘zombification’, that is, limit bankruptcies, increase debt and never raise interest rates again. He says it doesn’t make for a healthy economy, but it limits short-term pain that appears to be the current goal of most politicians.
“This zombification is inflationary in the recovery phase but deflationary soon afterwards as oversupply swamps demand.
“We are, therefore, suspicious that beyond 2021-22 we are entering a new inflationary cycle, as some have posited,” he concluded.
About the author

About the author


Shares
DREST gears up for innovation with the appointment of new co-CEO and CTO
Luxury fashion and lifestyle mobile game DREST has announced significant leadership changes as it prepares for an exciting phase of development and expansion. Read more

Shares
Hope for investors scared by share and crypto crashes
As share markets and cryptocurrency take a beating following the tightening of monetary policy across the world, investors are contemplating their next move. Read more

Shares
Cannon-Brookes tries to block AGL demerger
Mike Cannon-Brookes is not giving up on AGL after the latter announced 15 June as the date of the demerger vote. Read more

Shares
Qantas set to acquire Alliance Aviation
The two airlines have entered into a scheme implementation deed. Read more

Shares
Bond and share investors may shrug off RBA’s rate hike
As mortgage holders reel from the prospect of having to reach deeper into their hip pockets to make bigger repayments following the Reserve Bank of Australia’s (RBA) interest rate hike from 0Read more

Shares
How to buy Shares: A beginner’s guide in 2022
So you want to get in on the stock market action? Congratulations, that’s an exciting step! But first, there are a few things you should know before you buy your first shares. Read more

Shares
Elon Musk chokes up on bid to swallow Twitter
The battle of the bird has intensified over the last week, as Tesla and SpaceX founder Elon Musk has ramped up his aggressive campaign to buy the entirety of social media giant, Twitter. Read more

Shares
How to Make Money in Short Selling
What is short selling? There is a common practice for people who actively trade in the stock market, which is to “buy low and sell high”, but what if you can still make money by doing the opposite? Read more

Shares
DREST gears up for innovation with the appointment of new co-CEO and CTO
Luxury fashion and lifestyle mobile game DREST has announced significant leadership changes as it prepares for an exciting phase of development and expansion. Read more

Shares
Hope for investors scared by share and crypto crashes
As share markets and cryptocurrency take a beating following the tightening of monetary policy across the world, investors are contemplating their next move. Read more

Shares
Cannon-Brookes tries to block AGL demerger
Mike Cannon-Brookes is not giving up on AGL after the latter announced 15 June as the date of the demerger vote. Read more

Shares
Qantas set to acquire Alliance Aviation
The two airlines have entered into a scheme implementation deed. Read more

Shares
Bond and share investors may shrug off RBA’s rate hike
As mortgage holders reel from the prospect of having to reach deeper into their hip pockets to make bigger repayments following the Reserve Bank of Australia’s (RBA) interest rate hike from 0Read more

Shares
How to buy Shares: A beginner’s guide in 2022
So you want to get in on the stock market action? Congratulations, that’s an exciting step! But first, there are a few things you should know before you buy your first shares. Read more

Shares
Elon Musk chokes up on bid to swallow Twitter
The battle of the bird has intensified over the last week, as Tesla and SpaceX founder Elon Musk has ramped up his aggressive campaign to buy the entirety of social media giant, Twitter. Read more

Shares
How to Make Money in Short Selling
What is short selling? There is a common practice for people who actively trade in the stock market, which is to “buy low and sell high”, but what if you can still make money by doing the opposite? Read more