Knowing the inflation and growth regime is critical for equity and bond investing

 

Picking stocks and bonds is a critical part of investing, yet make no mistake, the inflation and growth environment do matter. It is critical to know what is the macro regime. Now it is hard to say what is the current regime relative to past history since you are living in the current; nevertheless, if you can formulate a view on the current regime, you can provide meaningful policy tilts for the benefit of your overall portfolio. When inflation is high, avoid bonds. When growth is high, hold stocks. This does not have to be complex, but a regime view is critical. Charts are from the UBS data yearbook