Schroeder: Gold, commodities and REITs return better in a stagflation environment

In the first half of 2021, on the one hand, economic growth rebounded strongly, but on the other hand, inflation also rose. As fiscal and monetary stimulus fades, the drivers of economic growth are showing signs of slowing. At the same time, inflation is expected to remain high due to supply chain disruptions and sharply higher energy prices. In light of the above, the market is increasingly worried about whether to form a stagflation situation of low growth and high inflation. In this context, how will investors respond to the possible stagnation? The inflationary environment over the past six months has been favourable for investing in risk assets such as equities and commodities, while gold has performed relatively poorly. But in an environment of stagflation, the top-performing asset classes could shift. Sean Markowicz, a chartered financial analyst and research and analysis strategist at Schroders Investments, said historical data showed that gold, commodity and real estate investment trusts (REITs) performed best during periods of stagflation. In a stagnant environment, gold demand may become relatively strong as investors look to hedge by holding safe-haven assets. At the same time, given the potential of commodities and REITs to hedge against inflation, attractive alternatives to assets are available, but returns in these asset classes may be relatively modest from historical data. The outlook for U.S. Treasuries remains unclear, and the future market will depend on the dynamic balance between inflation levels and economic growth. Gold put

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