Research Reels: Asset class returns for the coming decade

With inflation rising to 40-year highs, there is now a distinct possibility of permanently high inflation over the coming decade. In a new note, the Liberum strategists have looked at the likely returns of different asset classes in the coming decade. They simulate four different scenarios based on different assumptions for inflation and trend growth and find that permanently higher inflation is poison for equities. Inflation averaging 5% in the coming decade instead of 2% would cut equity returns by some 3 percentage points per year.  The team also looked at other asset classes like bonds and hedge funds and what to do in a stagflationary environment.

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