Investing in Deflation, Inflation, and Stagflation Regimes
Guido Baltussen (Erasmus University Rotterdam), et al.
July 2022
We examine asset class and factor premiums across inflationary regimes. As periods of high inflation and deflation are relatively uncommon in recent history, we use a deep sample starting in 1875. Moderate inflation scenarios provide the highest returns across asset class and factor premiums. During deflationary periods, nominal returns are low, but real returns are attractive. By contrast, real equity and bond returns are negative during a high inflation regime, and especially so during times of stagflation. During these ‘bad times’ factor premiums are positive, which helps to offset part of the real capital losses.
Daily Archives: July 8, 2022
Macro Briefing: 8 July 2022
* Former Japan Prime Minister Abe assassinated during during speech
* Johnson steps down at a vulnerable moment for the UK economy
* Putin warns Russia’s war on Ukraine has only just started
* US trade deficit narrowed for a second month in May
* Mortgage rates drop for a second week, posting largest decline since 2008
* US jobless claims remain low and stable, implying strong labor market:
