It’s time investors prepared for inflation

A lot of people seem to think that big price rises are a thing of the past. But investors could be hit with a few inflationary surprises in the coming year.

Is inflation “dead”? This year’s “epic spending and borrowing binge” by governments, near-zero interest rates and record-high stock prices all suggest that everyone thinks big price rises are a thing of the past, says The Economist. But the coming year could bring a few inflationary surprises, say Reade Pickert and Vince Golle on Bloomberg. Prices of industrial metals such as copper and iron ore are already soaring. A vaccine will induce a rush for travel and leisure activities next year, which could trigger price rises in unexpected places.

Yet any inflation spike will be a temporary “mirage”. US unemployment was 6.7% in November, almost twice last year’s level. With so much slack in the labour market, workers have little scope to demand higher pay. If wages don’t rise then inflation will have a hard time taking off in the longer-term.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.