Uncertainty on US inflation presages a tough time picking winners

Article Abstract:

US Federal Reserve chairman, Alan Greenspan, is giving contradictory messages on his views of inflation. On the one hand he argues that strong action would be taken promptly in response to inflationary dangers, and on the other hand he has stated that it is not clear whether there is a problem of overheating in the US economy. There is uncertainty among investors, and the US dollar could drop in value as a result of the current account deficit, so there is likely to be volatility, and selecting stocks will become more difficult.

Portfolio Management, United States, Forecasts and trends

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Life after death for US inflation

Article Abstract:

The US bond market expects inflation to rise whatever the Federal Reserve may do. Real interest rates could be at some 3% in 2009, which gives an expectation of inflation at 4.3%. There are different opinions as to whether this fear of inflation is exaggerated, but a self-fulfilling prophecy may mean that inflation rises. Rising productivity has cut costs for companies and higher bond yields mean more expensive borrowing so less capital investment and lower productivity.

Prices, Economic aspects, Capital market, Capital markets

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