Psigma’s Becket: Time to prepare for inflation crisis

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Psigma Investment Management chief investment officer Thomas Becket warns that an inflation crisis is on its way.

A spike in inflation has been a persistent worry for investors, as the unpredecented monetary easing carried out by the world’s central banks carries the risk of future inflation.

Becket says: ”Inflation uncertainty should be a primary focus of investors. I think the seeds of an inflation crisis are being sown now.”

As a way of counteracting inflation risk, Becket sees dividends from US equities as a good opportunity for investors seeking a growing income and is impressed that American companies are raising their payouts. Becket adds: “I think the same thing may happen in Japan.”

Legg Mason Global Asset Management head of product specialists Richard Gillham adds: ”Identifying growing income streams is incredibly important. Payout ratios are coming from a very low base as companies are paying out very small proportions of their money. We anticipate dividends to continue to grow.”

In terms of other areas that could provide income to investors in the face of possible inflation, Becket says he is increasingly looking at residential mortgage backed securities in Europe.

Becket says: “From the start of the year, we invested in some lower quality tranches of residential mortgage backed securities. There are some opportunities there but you have to be aware of liquidity risk.”