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FRONT OF MIND | ARTICLE – 2 Min

Graph of the week – Global inflation, will the last mile be the hardest?

Daniel Morris
By DANIEL MORRIS 12.01.2024

In this article:

    The rally in markets over the last month has largely been driven by the view of a “soft landing” in the US, that is, that core inflation can quickly return to 2% without the economy having to go through a recession. Slower growth and the resolution of all the pandemic-related disruptions is supposed to be sufficient. Hence the US Federal Reserve (Fed) can begin cutting policy rates as soon as March.

    The latest inflation data from the US does not necessarily support such an optimistic view. Core inflation declined from 4.0% in November to just 3.9% in December, a small deceleration. At this rate it would take almost two years before core inflation returned to the bank’s target. A recession may yet be avoided, but the Fed might not be cutting policy rates as soon as hoped.

    Disclaimer

    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
    Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, (the Sub-Fund's) performance may at times be better or worse than the performance of relatable funds that do not apply such standards.

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