Inflation fears have been subdued in the market over the past year. Both core CPI and headline CPI have been declining over the past nine months and came in at 2.0% and 1.9%, respectively, in March. Over the past twelve months, core CPI has ranged between 2.0 and 2.3%, near the Fed’s inflation target. At this stage of the market cycle, we view the risk of deflation from an economic slowdown to be of greater concern than unanticipated inflation. Some key points from our 2019 Real Assets Outlook include:
- Despite the performance challenges in commodity futures, we have moved to a bearish stance given the structural deficiencies in the asset class.
- We remain conservatively positioned within real estate and have lowered our outlook to neutral from neutral/positive within the asset class, broadly.
- We would be cautious within upstream energy, despite the appearance of attractive valuations and a contrarian opportunity. We instead favor midstream equities as an alternative within the energy vertical where we see a more attractive risk/return.
We look forward to discussing this research with you.
