If inflation is returning, are these funds types set to rise too?
As the pandemic situation began to improve with the launch of vaccination programs in many major economies, market watchers and economists began to raise the spectre of inflation. A rapid economic recovery, fueled by unprecedented monetary and fiscal stimulus and economies reopening with consumers flush with unspent earnings all signalled that inflationary pressure, long dormant, might resurface.
A little bit of inflation is to be expected – it means that the economy is growing at a healthy pace. If inflation gets out of hand, however, it can be a drag on companies’ profits as the cost of borrowing to invest and expand increases. It can also increase operating expenses such as salaries, rents and equipment purchases. Lower profits can drive share prices down.
If the inflation threat materializes, fund investors may want to take a look at these fund types:
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