How will assets react to higher inflation and all it brings?
How will assets react to higher inflation and all it brings?
In the first report of this inflation series, UBS Economics team laid out our sub-consensus view on inflation, but also identified heightened margins of error. In this second report, UBS global strategists & sector specialists present a framework which distils the countries, factors, industries and currencies most positively exposed to higher inflation and identify pain points beyond which inflation takes returns lower. We quantify how crosscurrents net out when inflation, rates & growth move together. We answer how far rates can rise, what US exceptionalism may mean for the dollar, whether the window of EM outperformance is still open, whether commodities are entering another super-cycle, and if higher rates will increase default risk. We assess the drivers and longevity of the Value rotation, and what this means for regional performance. From a superset identified by our framework, our global equity analysts narrow down 40 Buy rated stocks across US, Europe & APAC, which should do well in a higher inflation regime.
Top 15 investor questions on market implications of inflation
- Higher inflation, yields, growth – what's the net impact on different assets?
- Value Rotation: Just getting going, or nearly done?
- Will the markets force the Fed to move quicker?
- How far can long end yields rise?
- Know your tantrums: When do rates moves hurt?
- Do stronger growth and inflation boost the dollar?
- How relative pricing power impacts US equity rotations?
- Can European equities outperform if Value doesn’t?
- Why Japan may be the winner in APAC?
- Can EM assets still perform?
- Will higher US/European demand for commodities compensate for a slowing China?
- Is oil headed into another super-cycle?
- Why is gold hurting if inflation is going higher?
- Will global rates be able to catch up with the US?
- Will higher rates and inflation cause more defaults?
