Inflation has roared back – what does it mean for thematic investing?

How worried should investors be about inflation and rising interest rates? What does a world of potentially higher inflation and interest rates mean for investors? How will markets react and asset classes behave? Can growth stocks continue to thrive in a world of high inflation and interest rates? The past decade was a world of low inflation, low interest rates and sluggish economic growth. The pandemic, and its after effects, has shaken this up. With government’s turning on the spending taps and central bank policy being taken to new extremes, major economies were able to rapidly rebound following the lifting of lockdowns. But one nasty side effect has been rising inflation. In the United States, United Kingdom and Europe, inflation has reached levels not seen in a generation. While it was initially hoped that this inflation would be temporary, support for such a view is fading. It is now increasingly feared that inflation is at risk of becoming entrenched – the Federal Reserve has stopped referring to inflation as “transitory.” Indeed, centrals banks have started to cautiously raise interest rates and scale back quantitative easing. For professional investors only. Capital at risk.