By - Dec 10, 2010 5:17 AM GMT+0800
A period of “unexpected” global inflation may mean that commodities will outperform stocks and bonds, according to Credit Suisse Asset Management.
“As new inflationary environments develop around the world, they will likely be unexpected,” Nelson Louie, the firm’s global head of commodities, and portfolio manager Christopher Burton wrote in a report. Raw materials “tend to be more highly correlated to periods of unexpected inflation” than equities or debt assets.
It’s unclear if the Federal Reserve’s plan to buy government bonds will spur inflation, or if high unemployment, idle industrial capacity and deleveraging will stoke deflation, a period of widespread price declines, said Louie and Burton, who together manage $7 billion for the firm.
“No matter which of the two forces prevails in developed economies, one thing appears clear, the inflationary outcome is likely to be ‘unexpected,’” the firm said. “This creates a compelling case” for commodities.
Raw materials outperform equities by almost 3 percentage points “in periods of extreme, high unexpected inflation,” Credit Suisse said. Commodities “inherently rise with” climbing consumer prices, Louie and Burton said.
Stocks and bonds often perform better when inflation is stable or slowing, “usually because the market has already discounted the impact of expected inflation,” the bank said. These assets are most at risk when “prices change unexpectedly.”
Commodities may also be supported by demand in emerging markets, which have been “strong buyers of industrial metals and agricultural products,” Credit Suisse said.
“As new inflationary environments develop around the world, they will likely be unexpected,” Nelson Louie, the firm’s global head of commodities, and portfolio manager Christopher Burton wrote in a report. Raw materials “tend to be more highly correlated to periods of unexpected inflation” than equities or debt assets.
It’s unclear if the Federal Reserve’s plan to buy government bonds will spur inflation, or if high unemployment, idle industrial capacity and deleveraging will stoke deflation, a period of widespread price declines, said Louie and Burton, who together manage $7 billion for the firm.
“No matter which of the two forces prevails in developed economies, one thing appears clear, the inflationary outcome is likely to be ‘unexpected,’” the firm said. “This creates a compelling case” for commodities.
Raw materials outperform equities by almost 3 percentage points “in periods of extreme, high unexpected inflation,” Credit Suisse said. Commodities “inherently rise with” climbing consumer prices, Louie and Burton said.
Stocks and bonds often perform better when inflation is stable or slowing, “usually because the market has already discounted the impact of expected inflation,” the bank said. These assets are most at risk when “prices change unexpectedly.”
Commodities may also be supported by demand in emerging markets, which have been “strong buyers of industrial metals and agricultural products,” Credit Suisse said.
No comments:
Post a Comment