Q: What does your crystal ball say about US inflation heading into 2026? With equities looking vulnerable as they bouncing along the top, bonds also seemed poised to drop if prices rise more. In a conservative portfolio, what would be your equity/fixed income mix...and I assume you would stay short on most bonds.
5i Research Answer:
We are not too concerned about inflation at this stage. While the jobs market is stable, it is also not 'strong' so there is not much of a potential for inflation due to rising wages or a hot job market. Housing growth is also slow, adding a further weight on any potential inflationary impulses. Finally, while broad economic growth is also fine, it is not likely to be strong enough where companies feel confident that they can increase prices without seeing demand decline. There will always be standout areas (potentially utility prices with AI trends) to point to for inflation but we think it is hard in the current environment to see an obvious path to outsized inflation.