Independent Strategy

Never is a long time

It is something of a consensus view that equities are an inflation hedge. But this is only true if demand drives output prices up faster than input prices. In the sort of inflation that Covid-19 policies could engender that is pretty unlikely. It is more likely that damaged slow-growth economies would see cost inflation as a result of excess money creation. But demand driven inflation would not materialise. Equities might outperform tumbling bonds, but they are no hedge against this sort of inflation. Furthermore, the rise in bond yields would gut the superior dividend yield argument for equities.

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