Alert iconWarning: Unsupported web browser

In View no longer supports your current web browser version, which means some functionality may be limited. Please update your browser for the best experience before you log in.

close icon
Citi Private Bank logo

Unsupported browser

Our website no longer supports your current web browser version, which means you are no longer able to access this website. Please update your browser to continue.

Continue
Investment strategy
November 14, 2021
2 mins

The fear of inflation: Portfolio impacts and potential opportunities

November 14, 2021
2 mins
David Bailin
Chief Investment Officer and Global Head of Investments
Steven Wieting
Steven Wieting
SUMMARY

In many respects, the US economy is in great shape. But that’s not what most Americans think. Their economic anxieties can be attributed to one issue – inflation. However, we believe long-term portfolio growth opportunities will be not significantly derailed by the levels of inflation we expect in the future.

  • For a consumer, inflation is a tangible, visceral problem. Robert J. Shiller’s suggested that inflation causes people to lose confidence in their ability to “keep up” and to lose faith in their policymaker’s ability to help them.
  • Ironically, the good decisions made by governments during the pandemic are the very reason for the economic health of most Americans and, in part, are the cause of this temporary burst of severe inflation.
  • In the past, large spikes in inflation have ended economic expansions. Looking ahead, we see very-solid gains in overall US employment, even as the balance sheets of households are improving. We believe incomes will stay ahead of temporary price shocks. In short, we continue to believe the recovery in US business and employment will outlast and outrun the inflation spike.
  • Inflation has been with us as long as there has been money. Outright deflation has been rare, and governments know much better how to inflate (weakening the value of money) than to manage long-term structural challenges.
  • The degree to which inflation rises and falls is a major factor for consumers and impacts their behavior and confidence levels significantly. Our expectation is that the last decade’s inflation rate - just below 2% and the lowest since the 1930s – marked a secular low point. We expect somewhat higher levels of inflation in the decade to come. That said, the present burst of inflation is largely due to the extraordinary measures taken by governments to ensure the safety of individuals and businesses during the pandemic.
  • Recent inflationary concerns and bond price responses have negatively impacted a variety of secular growth industries such as fintech, greentech, medtech and cybersecurity. We don’t believe these long-term growth opportunities will be significantly derailed by the levels of inflation we expect in the future.
  • In particular, investments in fintech are timely and anti-inflationary. Just how radical is the ongoing shift to vintech? The total market cap of the largest US payments-focused fintech companies has now exceeded the entire Russell 2000 bank index.
CIO Strategy Bulletin

Insights

See our insights and the issues that matter for your wealth.

View all insights
The environment for humans and bonds
David Bailin - Steven Wieting
November 7, 2021
Q4 2021 began with the US adding 531,000 new jobs in October, a positive sign for the pace of economic growth, but far stronger than can be sustained in the long run by US demographics. We see the “COVID bounce-back” and policy distortions significantly boosting growth and inflation.
Learn more about The environment for humans and bonds
European central banks continue to support growth despite inflationary pressures
Jeffrey Sacks - Maya Issa
November 4, 2021
Major European central banks have pushed back at the idea of imminent rates hikes. Citi Private Bank believes policymakers are keen to support growth and do not appear to be particularly worried about higher-for-longer inflation.
Learn more about European central banks continue to support growth despite inflationary pressures
The US and China
Citi Private Bank & GZERO Media
November 18, 2021
A two-part series on the relationship between the U.S. and China.
Learn more about The US and China
Initial market reaction to Fed’s tapering was pretty muted
Bruce Harris
November 3, 2021
The dollar had little reaction to the Fed’s well anticipated tapering announcement. We believe the markets have priced in 2 to 3 rate hikes by end of 2022 and 4 to 5 hikes by end of 2023. It is indeed nearly impossible for the Fed to beat such hawkish expectations.
Learn more about Initial market reaction to Fed’s tapering was pretty muted

Insights

See our insights and the issues that matter for your wealth.

View all insights
If you are a Citi Private Bank client you can check the value of your portfolio by reviewing your monthly statements or, if you use Citi Private Bank In View, by navigating to the Account Overview page via Portfolio → Overview. If you have any queries please contact your usual Citi Private Bank representative.
FINRA icon
FINRA icon
FINRA's BrokerCheck - Learn more about Citigroup Global Markets Inc.'s background

INVESTMENT PRODUCTS: NOT FDIC INSURED. NOT CDIC INSURED. NOT GOVERNMENT INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.

Citi Private Bank is a business of Citigroup Inc. ("Citigroup"), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates of Citigroup. Not all products and services are provided by all affiliates or are available at all locations. In the U.S., investment products and services are provided by Citigroup Global Markets Inc. "CGMI"), member FINRA and SIPC, and also Citi Private Advisory, LLC ("Citi Advisory"), member of FINRA and SIPC. CGMI accounts are carried by Pershing LLC, member FINRA, NYSE, SIPC. CGMI, Citi Advisory and Citibank, N.A. are affiliated companies under the common control of Citigroup.

Outside the U.S., investment products and services are provided by other Citigroup affiliates. Investment Management services (including portfolio management) are available through CGMI, Citi Advisory, Citibank, N.A. and other affiliated advisory businesses. Neither Citigroup nor any of its affiliates provides tax or legal advice.

Notice at Collection | CA Privacy Hub | Tax Compliance & Regulatory Info | CGMI Financial statement | PSD2 API | MAS Electronic Payments Guidelines | Accessibility | Important disclosure | Terms & Conditions  | The Sustainable Finance Disclosure Regulation

To learn about CGMI and Citi Advisory investment business, as well as our relationship with you, please review our Form Client Relationship Summary.

© 2016 - 2021 Citigroup Inc. All Rights Reserved.

FINRA icon
FINRA icon FINRA's BrokerCheck - Learn more about Citigroup Global Markets Inc.'s background
Close Modal

You're about to leave the Citi Private Bank website

By clicking continue, you will visit a third-party website that is not owned or managed by us.

We have no control of the content, privacy or security beyond this point.

Continue

Stay on this page