As the housing market wakes up and the stock market rallies, strong gains in asset prices are improving US household wealth and helping to reduce the federal deficit. This is a great boost for confidence, but it also sharpens the challenge facing US fiscal and monetary authorities. (more…)
Jon Ruff and Patrick Rudden
As UK inflation surges ahead, equity investors should be concerned. With yields on inflation-linked bonds at extreme lows, we think real assets offer a better way to combat the risk of rising prices. (more…)
With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What’s changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble? (more…)
Seth J. Masters and Jon Ruff
Several prominent pension funds have slashed their commodity futures investments for delivering poor returns with higher volatility than usual, while failing to diversify equity exposures as expected, The Wall Street Journal recently reported. If inflation rises, they may regret it.
Bank of England governor-elect, Mark Carney, has raised hopes that the central bank may soon switch to a nominal GDP target. In our view, the costs outweigh the benefits, but the attractions of a radical new approach will grow if the economy remains stuck in the doldrums. (more…)
The UK is celebrating a near three-year low in consumer price inflation, but we think the Bank of England (BOE) should be more worried about the role that money and credit play in the inflation process. (more…)
Treasury-inflation protected securities, or TIPS, have been a popular choice for investors concerned about future inflation. And TIPS’ returns have been impressive in recent years. But the main contributor to TIPS’ performance isn’t inflation. It’s an ingredient that could become as hurtful down the road as it’s been helpful in the past. (more…)
In the past few weeks, central banks have reaffirmed their intent to do “whatever it takes,” in European Central Bank (ECB) President Mario Draghi’s words, to address the various ailments afflicting the global economy. While central bank actions may or may not have their desired effects on the real economy, they do create short-term opportunities and medium-term risks for investors, as my colleague Jon Ruff explains below. (more…)
Popular strategies for hedging against deflation and hyperinflation are likely to be disastrous if the economic outlook grows more benign as we expect.