The West's preoccupation with deflation is deceptive

ON ASSET ALLOCATION

Rathbones manager David Coombs explains why the West's fear of deflation is somewhat deceptive.

We try to anticipate the most likely risks in the short to medium term and allocate capital to those areas that will help mitigate those risks. Clearly, this is not an exact science. However, it is more relevant on an intuitive level than relying on retrospective models, which typically use +20 years of historic volatility data. As any investor who experienced 2008 will know, it is not volatility that really destroys value but ‘event risk’, leading to seizures in liquidity. At this juncture, equities appear to offer value relative to Western government bonds, property and cash, leadi...