The Future of Inflation Is the Biggest Question in Finance

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1 / 3The Future of Inflation Is the Biggest Question in Finance(Bloomberg) — Perhaps the most challenging riddle for investors in the pandemic is whether another centuries-old scourge is going to return.Inflation can wreck even the safest portfolio by eroding the value of investments for decades. But you would be hard pressed to find anyone among the younger generation of investors, within developed markets at least, who has faced it in any meaningful way. The last major episode was back in the 1970s and ’80s, and inflation has all but disappeared since the 2008 financial crisis.But the pandemic has changed the world so dramatically that Wall Street’s heavyweights from Pacific Investment Management Co. to AllianceBernstein Holding LP say it’s a problem that’s bound to return.Not everyone agrees. Some argue deflation is just as likely, and others like UBS Wealth Management are positioning for softer price increases, a scenario known as lowflation. “It is the billion dollar question,” says Christoph Rieger, head of fixed-rate strategy at Commerzbank AG.The mainstream view is that central banks can rescue their economies now without destabilizing prices in the future. Bonds, the assets most vulnerable to inflation, have surged and the …

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