Jupiter’s Chatfeild-Roberts: Fixed interest investors must beware inflation threat

John Chatfeild Roberts FW 480

Jupiter head of multi-manager and chief investment officer John Chatfeild-Roberts says investments in fixed interest markets should be handled carefully while the threat of inflation hangs over many global economies.

Chatfeild-Roberts (pictured) says although the decision by central banks to print money through quantitative easing may support financial markets in the short term it may be storing up an inflation problem for the future.

He says: “Bonds issued by Western Governments such as the US and the UK are still in demand despite historically low yields but could come under pressure in an inflationary environment where interest rates start to rise. Opportunities remain in carefully selected corporate bonds but again, rising interest rates would create a headwind for them.”

In September last year, Chatfeild-Roberts warned inflation could near double digits over the next five years and be the “achilles heel” of the UK economy.

Chatfeild-Roberts believes the consumer prices index under-records the actual inflation experienced by many groups of people, particularly those in retirement.

He says: “Having exposure to investments that offer some protection against higher prices looks like a sensible precaution. Large multi-national businesses with strong balance sheets are not as cheap as they were but remain resilient in the face of low global growth and their ability to grow dividends through the economic cycle makes them an attractive option for those seeking long-term income and inflation protection.”

Chatfeild-Roberts says the current rally being experienced by global markets can continue provided the European Central Bank continues to support weaker economies and the US recovery continues.

He says: “Not much has changed from a year ago and markets are still facing several long term challenges. The key issue remains Europe. The single currency will only work if Germany is prepared to pay for it – for a very long time.  But we don’t underestimate the desire of European politicians to keep the “European project” intact, at almost any price.”