Key facts
- US CPI is predicted to rise to a 13-year high of 4.7% from a year earlier.
- Nigel Green, deVere Group CEO, warned that inflation debate volatility will define stock markets in the second half of 2021.
- 53% of US retirement plan sponsors expect the next 12 months to be more volatile than 2022 and early 2023, according to a Schroders survey.
- Tariffs and protectionist trade policies are the top macroeconomic concern for US retirement plan sponsors, cited by 83%.
Consumers, business owners, and investors are increasingly concerned about rising inflation and its potential market repercussions. Nigel Green, CEO of deVere Group, warned that inflation debate volatility will define stock markets in the second half of 2021, advising investors to be "super-selective" and ensure "proper diversification." The U.S. CPI is predicted to rise to a 13-year high of 4.7% from a year earlier, up from 4.2% in April, which was already the fastest jump since 2008.
Green stated that a larger-than-expected rise in U.S. core inflation could lead to a sharp increase in volatility across most asset classes, potentially forcing central banks to reverse policies that have kept interest rates low. Conversely, lower-than-expected inflation might be seen as transient, easing fears of policy tightening. He emphasized that the inflation debate is likely to persist throughout 2021, creating market turbulence.
Separately, a Schroders-sponsored survey indicates that a majority of institutional investors, including U.S. retirement plans, expect significant market volatility over the next 12 months. Fifty-three percent of U.S. retirement plan sponsors anticipate more volatility than in 2022 and early 2023, with 41% believing the coming year could be even more volatile than the Global Financial Crisis. Top macroeconomic concerns for respondents include tariffs and protectionist trade policies (83%), an economic downturn (60%), and higher inflation (57%). In response, 51% of plans rank portfolio resilience as their top investment priority.
The survey also highlighted a renewed focus on active management, with 63% of U.S. retirement plans confident in its ability to deliver value and 77% more likely to employ it in the next year. Active managers are valued for their nimbleness, diversification capabilities, and specialist approaches. Additionally, private debt and credit alternatives are increasingly viewed as a top return opportunity and a reliable source of income by institutional investors.