A new study from Tabula Investment Management indicates that just 40% of professional investors are ‘very concerned’ about inflation, despite the UK hitting 10.1% in September and US inflation running at more than 8%.
In an online survey of 50 wealth managers, along with an equal number of pension funds and institutional investors across Europe, Tabula found the majority (78%) expects US inflation to achieve the Federal Reserve’s target of 2% by 2024, while 65% of respondents see UK inflation falling to that level in the next two years. Similarly, 70% of those asked suggested that eurozone inflation would be 2% or lower within two years.
Michael John Lytle, CEO of Tabula, said: “Rising inflation and interest rates are major challenges for investors. But the real concern is that many wealth and pension fund managers appear to be underestimating quite how sticky current inflation levels might be.”
European inflation linked ETFs have seen net outflows this year, according to etfbook.com, with total assets in inflation-linked funds now just $18bn compared to $28bn at the start of the year. Meanwhile, the European Commission states that inflation in the euro area was up to 9.9% in September, having increased from 9.1% the month before.
This survey also comes a few days after the IMF released a blog post saying that Europe must tackle what it calls ‘a toxic mix of high inflation and flagging growth’.
On the blog, Alfred Kammer, director of the European department at the IMF, wrote: “This winter, more than half of the countries in the euro area will experience technical recessions, with at least two consecutive quarters of shrinking output; among these countries, output will fall, on an average, by about 1.5% from its peak. Croatia, Poland and Romania will experience technical recessions as well, with an average peak-to-trough output decline of more than 3%. Next year, Europe’s output and income will be nearly half a trillion euros lower as compared to the IMF’s pre-war forecasts—a stark illustration of the continent’s severe economic losses from [the war arising from Russia’s invasion of Ukraine].”
Kammer warned: “And while inflation is projected to decline next year, it will stay significantly above central bank objectives, at about 6% and 12%, respectively, in advanced and emerging European economies. Growth and inflation could both get worse than these already sobering forecasts. European policymakers have swiftly responded to the energy crisis and built adequate gas storage ahead of the heating season, but further disruptions to energy supplies could lead to more economic pain.”