It has been a couple years since inflation caused much concern in the U.S., but we expect it to be a growing theme as prices are rising not only for oil but for food and industrial production commodities as well.
J.P. Morgan circulated a market bulletin Friday providing perspective on rising oil prices and their economic impact. One section of the bulletin specifically analyzed how various investments have performed over the past 40 years in the four inflationary scenarios in the graphs below. J.P. Morgan research indicates that there have been seven comparable periods of low but rising inflation. In those periods, equities and investments in commodities have held up best. It’s possible that we could remain in a “low but rising” inflationary environment for quite a while but that will largely depend on the Federal Reserve and its tactics for keeping inflation relevant but not overwhelming.
As the J.P. Morgan piece concludes, this is “food for thought for investors thinking
through this complex situation.”
Sources: BLS, Barclays Captial, Robert Shiller, Federal Reserve, Strategas/Ibbotson, Standard & Poor’s, FactSet, J.P. Morgan Asset Management.
The complete J.P. Morgan Market Bulletin is available here.
~ Brooks, Hughes & Jones, Partners in Wealth Management, Tacoma, Washington
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