2023/Q1 Article 03. The effectiveness of different asset types as a hedge against inflation
Series: Economic Bulletin.
Author: Alberto Fuertes Mendoza.
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Abstract
Rationale
The current period of high inflation makes it difficult for investors to maintain their profitability targets in real terms. Against this background, it is important to analyse the returns on different types of assets recorded in this and past inflationary episodes.
Takeaways
- In the past, both commodities and inflation-linked bonds have generated positive real returns duringinflationary periods, while conventional sovereign bonds and general stock market indices haveyielded negative real returns.
- In the current inflationary episode energy-related assets have generated the highest returns, while inthe United States residential real estate has also performed well.
- In the recent period, both in the euro area and the United States investors have increased their holdingsin investment funds specialising in inflation-linked bonds, and have reduced their holdings inconventional bond and equity funds.