(AOF) – “The disinflation scenario has become bogged down”, note Marc Dummer, client portfolio manager, and Mike Reidy, director, client portfolio manager at Principal Asset Management, recalling that annualized basic price inflation consumption in the United States increased from 1.5% in the fourth quarter of 2023 to 4.4% in the first quarter of 2024. “With inflation more persistent than expected, the role of real assets in a diversified portfolio is increasingly more important to mitigate the effects of inflation.
“Historically, in periods of high inflation, real assets, such as commodities and real estate, have helped mitigate the risks associated with economic difficulties,” emphasize the managers. “In 1970, a period not unlike today’s environment, when stocks and bonds failed to keep pace with inflation, real assets generated returns above the rate of inflation” .
In 2022, traditional stocks and bonds “declined almost simultaneously”, while “the 60/40 strategy recorded its worst performance since 2008 and one of the worst in its history”. Conversely, “real assets outperformed, with commodities easily achieving their best performance since the global financial crisis.”
