Macroeconomic & Geopolitical
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The Long View: Inflationary Riptide or Reflationary Current?
ClearBridge Investments believe any inflation scare will be short lived, making stimulus efforts supportive of equities.
- The ClearBridge Recession Risk Dashboard continues to flash an overall green expansionary signal, with one positive signal change in March as Profit Margins improved to green. We expect further improvement in the weaker areas of the dashboard as we move through the second quarter.
- With a healthy consumer, accommodative policy, accelerating GDP and the potential for herd immunity from COVID-19, the risk of an inflationary overshoot has increased. We believe any inflation scare, however, will be short-lived.
- The Fed’s average inflation targeting stance has some investors worried about the possibility of runaway inflation reminiscent of the 1970s, yet we believe the disinflationary effects of globalization and technology should act to keep long-term inflation in check, making current reflationary efforts supportive of equities.