EP7: Inflation with Christopher Burton, CFA, FRM of Credit Suisse

Deconstructing Alpha

The big macro-economic surprise in 2021 is INFLATION! The latest CPI-U year-over-year inflation print for the 12 months ending May 2021 is 5%. Regardless of whether the rise in general prices – influenced by the sectors of energy, lumber, or used cars – has been lumpy or not, it does appear that most of us are witnessing pockets of inflation in our lives. And, inflation is contagious, inflation in one area often spills over into others.

This current inflation appears to be an about-face from the decade of deflationary forces that languished through the decade prior to COVID. The 2010s were characterized by slow growth, low inflation, and low-interest rates. To combat the persistent slow and low economy, central banks around the world were unrelenting in their efforts to stimulate the world’s economy, which largely just led to rising asset prices. Fast forward through one pandemic and one year later, and BOOM! An explosion in consumer demand and a disruption in supply. Have we entered a new paradigm of demand and exceeding supply, or will we return to the old, oversupplied economy that we are all so used to? In other words, is the inflation that we are witnessing transitory or persistent?

In this episode, we break this down. What is happening with inflation, what does it mean to portfolios, how best to hedge against inflation, and is this inflation transient or persistent?