Inflation

UK and US inflation will exceed two per cent in five years’ time, say investment professionals

More than two-thirds of investment professionals believe that inflation will exceed two per cent in the UK and US in five years’ time, according to a survey taken in the run up to and during the CFA UK Annual Conference on 12 June.

June 2019 forecasts for the Eurozone show that 52 per cent of investment professionals believe that inflation will be between zero per cent and two per cent while 37 per cent believe that it will exceed two per cent.
 
Over half of respondents (54 per cent) believe that UK 10-year Gilt yields will be between three per cent and five per cent while a similar number (53 per cent) think that US 10-year Treasuries will be in the same range in June 2019. Just under half of respondents (45 per cent) believe that German 10-year Bunds will yield between two per cent and three per cent by this date.
 
In terms of the asset classes expected to do best and worst over the next five years, 48 per cent of investment professionals believe that emerging market equities will deliver the greatest real rate of return, with a quarter thinking that developed market equities will be the best class. Government bonds meanwhile, were expected to generate the lowest real rate of rate of return by 46 per cent of those polled with 38 per cent reckoning that cash would be the worst performer.
 
Will Goodhart, chief executive of CFA UK, says: “Faith in the global financial system would appear to be taking root with healthy levels of inflation expected across the UK, US and Eurozone in the next five years. Thoughts of any kind of deflation would appear to be held by only the tiniest minorities. Government bond yields are expected to stabilise at more than three per cent but investor belief remains firmly rooted in equities to deliver the highest levels of real return with emerging markets expected to be the stand out performer between now and June 2019.”

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