Premier Miton's David Jane: 'We Should Not Fear High Inflation But Accept Inflation Is Back'

Speaking at a panel on multi-asset investing at this year's Square Mile Conference, he said that a 'higher for longer' interest rates regime was "a good thing" and argued that "we should not fear high inflation but accept inflation is back".

Jane said that slightly higher inflation "oils the wheels" of the economy and deals with fiscal deficits, "smoothing the way through going forward".

Although admitting higher inflation will cause higher volatility, he argued it will also create a "higher nominal return environment" with better bond yields.

IMF: Global economy has 'little margin' for monetary policy error

Paul Flood, head of mixed asset investment at Newton Investment Management, disagreed with Jane, stating that inflation was a "scourge" as it created "huge uncertainty" as well as the risk of a hard landing if it fails to get close to target.

Over the long term, Flood said that the end of globalisation was going to propel inflation upward, especially while companies were trying to bring manufacturing "back to the West", which will lead to products, services and labour to cost more.

Looking ahead, he said the current environment provided "huge opportunities" for multi-asset active managers to reallocate between cycles, as there were more opportunities for flexibility as well.

But Keith Balmer, director and portfolio manager within Columbia Threadneedle Investments' multi-asset team, noted this flexibility should not focus on a single style of investing.

Despite the passive industry bringing down all their costs and leading to investors getting more returns, Balmer argued for a "blend" of different styles to "get a better portfolio".

On the issue of portfolio construction, Flood and Jane took opposing sides on the 60/40 debate.

Flood argued the traditional 60/40 portfolio had ended a decade ago, "when the US Treasury yield bottomed out at 1.5%", but it was now facing a "rebirth" as bonds will offer much better opportunities in terms of diversification in the near future.

Bank of England calls on money market funds to bolster liquidity levels

Jane argued the opposite, saying the 60/40 model performed well while there was a negative correlation between equities and bonds, whereas the current environment is "much more normal" with bonds and equities positively correlated.

He also said that with the current rate of inflation, which the Bank of England has said is set to remain high for at least until 2025, risk was on the downside at the long end of the bond market.

In this backdrop, multi-asset managers should focus on value stocks over growth, he noted, adding that managing a multi-asset fund with the idea that there was going to be a bear market "is wrong".

RECENT NEWS

The Penny Drops: Understanding The Complex World Of Small Stock Machinations

Micro-cap stocks, often overlooked by mainstream investors, have recently garnered significant attention due to rising c... Read more

Current Economic Indicators And Consumer Behavior

Consumer spending is a crucial driver of economic growth, accounting for a significant portion of the US GDP. Recently, ... Read more

Skepticism Surrounds Trump's Dollar Devaluation Proposal

Investors and analysts remain skeptical of former President Trump's dollar devaluation plan, citing tax cuts and tariffs... Read more

Financial Markets In Flux After Biden's Exit From Presidential Race

Re-evaluation of ‘Trump trades’ leads to market volatility and strategic shifts.The unexpected withdrawal of Joe Bid... Read more

British Pound Poised For Continued Gains As Wall Street Banks Increase Bets

The British pound is poised for continued gains, with Wall Street banks increasing their bets on sterling's strength. Th... Read more

China's PBoC Cuts Short-Term Rates To Stimulate Economy

In a move to support economic growth, the People's Bank of China (PBoC) has cut its main short-term policy rate for the ... Read more