Concerns around inflation have dominated investor conversations across the globe throughout 2021. The initial consensus that the price increases would be “transitory” – used with particular emphasis by the Federal Reserve – has worn thin in the face of a pronounced energy crisis, labour shortages and supply chain bottlenecks. In addition, COVID distortions have made it extremely difficult to accurately predict the level of inflation we can expect from here.
We all understand very well how inflation erodes the purchasing power of our savings and it has always been a treat to our retirement arrangement. Therefore, it would be pertinent to assess the potential impact on our portfolio if we are indeed entering an inflationary environment for a prolonged period.
Against this market backdrop, we believe investors, particularly pension funds and individual savers, should turn to Quality businesses with three core characteristics that should offer protection from any prolonged inflationary pressures: