Current inflation & high interest rates vs long term trends of disinflation and low growth – Webinar highlights with Hyperion Asset Management

During the month of June 2022, Aspiri held a webinar with Hyperion Asset Management to talk all things stock markets, which have fallen quite heavily over the past 8 months. We have taken some highlights of the webinar and in this video Hyperion give us an update as to where stock markets are at and why they have fallen quite heavily.

If anything in this video resonates with you or you would like further clarification on anything seen in the video, then contact us today. You can also read the main points of the video down below.

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Deflationary pressures will prevail over the long term.

Factors of short term inflation:

  • High energy & commodity prices
  • Supply chain disruption
  • Excessive fiscal stimulus
  • Surge in goods demand
  • Strong cyclical demand growth

The inflationary period we are in now will be short-lived, and there are several factors that point to the slowing of inflation. To begin with, the stimulus provided by Covid-19 has largely stopped. Also, consumers have changed their behavior after surging for goods other than services. High energy prices and commodity prices have led to a rebound in the global economy. While energy prices remain elevated due to ongoing unrest in Russia and Ukraine, commodity prices around the world are starting to decline.

Factors of Deflation/ Disinflation:

  • High debt levels & Financialisation
  • Rising wealth inequality
  • Weak secular demand growth
  • Ageing population & demographic change
  • Central Banks targeting low inflation
  • Technology, automation, AI and sharing

Does the aging population and demographic change have any impact and continue that long sort of slow inflation over the longer term? And why?

  • Over the long term, inflation would be slow. The aging population does not consume at the rate of younger people. As they
    age, many people have already done most of their consumption and are moving out of the market. The money that they do spend is a drag on the economy.
  • With the aging population leaving the workforce, saving their money more, and spending less on services and goods than the rest of the population, there is a big drain on economies for health care.
  • Younger people tend to use software more, and they use different services that do not have the same economic impact as previous generations.
  • The shift in demographics is influencing the economy gradually. The global economy is slowing, with GDP growth tailing off from the highs that were seen through the pandemic.
  • We’re also starting to see underlying core inflation starting to roll off. Headline inflation is going to be high because of energy prices, oil prices, because food is a derivative of that and rent rises are still high. But the underlying drivers of the economy is really starting to look weak.
  • In 2019, consumers were extremely fragile. We are back in a similar situation today, but with more debt. It will be interesting to see how this plays out through the end of this year and early next year.
  • The rate rise cycle we are seeing at present is very aggressive. It is good to try to keep inflation in check, but we do not want to crush growth too much, even though it is tailing off now.
  • A lot of those deflation factors will come into play and be more prevalent depending on how far they go.

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