Plenty of commentators in the last few weeks have been discussing the possibility of a sustained period of inflation going forward? Some are speculating that we might be looking at a period of up to 30 years when hard assets eg. property, gold and commodities form the basis of a sound investment portfolio and people diversify into equities.

The crux of it is that there are lots of factors that appear to be coming together to make this a likely scenario, but mainly the fact that central banks are no longer scared of it.

Why 30 years? Basically that’s shorthand for a generation, for example the period of disinflation that we have had is 40 years, it’s a powerful force that goes in multi decade cycles. The driving force up to now has been the amount central banks have been scared of it, and now they are begging for it.

What’s happened in the 1970s? What should investors focus on?

Commodities outperformed. People who borrowed money out performed. People who lived on income from equities investments performed very badly, they were effectively impoverished. The various debts that people had were inflated away, including government debt. 

The people and businesses that do really well during an inflationary period are those whose income or profit/cashflow can rise with inflation, while at the same time having any debt held eroded away while the value of assets increases.

Is the world a very different place now to the 1970s when the government was trying to pay off World War II war debt? Post coronavirus the government has debt to GDP levels not seen since post-World War II. The debt from World War II was paid off, how? Inflation was a massive part of it.

Who knows exactly what's going to happen and when, but it's certainly worth thinking about and positioning yourself so you can prosper if it happens….