Multi-asset funds look for inflation hedges as Covid-19 heralds 'final disinflationary flourish'

Monetary stimulus brought into sharp focus

The coronavirus crisis "will very likely lead to a final disinflationary flourish", as some multi-asset investors look to hedge their funds against the potential return to an inflationary environment.

After a near-30-year period of benign inflation, fiscal and monetary stimulus have been used aggressively to defend economies against the effects of a Covid-19 downturn. As a result, investors have been forced to contemplate higher levels of inflation once economic activity returns to normal. The US and German governments, for instance, put together packages worth $2trn (£1.6trn) and €750bn (£645bn) respectively; the US Federal Reserve's balance sheet has ballooned to $6.5trn and the European Union has suspended debt and deficit requirements across its member nations. This is likel...