While the Bank of England has signalled that it will overlook the inflation overshoot, Stupnytska believes policy will not be eased further at the Bank’s upcoming meeting in November.
She adds: “The recent currency plunge has loosened financial conditions significantly while economic data has been holding up, suggesting the Bank of England is likely to stay in the wait-and-see mode for now.”
So what of investments? If inflation does begin to pick up, then it is a good time to reassess your holdings in fixed income.
Short duration and high-yield funds may well offer some degree of inflation protection – Chelsea Financial Services recommends AXA Sterling Credit Short Duration Bond, GAM Star Credit Opportunities and Invesco Perpetual Monthly Income Plus.
James Yardley, Chelsea’s senior analyst, also points to specific companies that could do better in an inflationary environment. Pricing power, he says, remains particularly important as the Unilever example teaches us.
He adds: “Infrastructure is also a good bet, as toll roads, for example, have prices linked to inflation. You could consider First State Global Listed Infrastructure or VT UK Infrastructure Income.
“Energy companies also tend to do well. While they are heavily regulated, the regulator will allow them to raise prices in line with inflation. So the likes of utilities stocks or even gas companies may be attractive, or a fund like Guinness Global Energy.”
While we are spreading the net globally, investors really should be keeping an eye on the FANG (Facebook, Amazon, Netflix and Google) stocks this Halloween.
The aforementioned Netflix has somewhat surprised Wall Street today by beating third-quarter earnings and subscriber expectations, analysts are waiting with bated breath for Alphabet’s Q3 results, due on 27 October, while Amazon’s share price has risen 70% since February.
Of course, tech stock prices have a history of getting ahead of themselves, but that’s a different story altogether.
