In an essay for AdvisorHub, StratiFi’s Chief Investment Officer Steven M. Sears has alerted investors to the risk that rising inflation has on traditional portfolio allocations.
Should inflation, which has been unusually low for much of the past decade, rise, some major institutional investors are concerned that it could hurt investors by disrupting one of the most widely held ideas in investment management: that diversifying portfolios between stocks and bonds produces the best possible results.
Higher inflation – and some forecasts predict it will range from 2% to 2.5% this year – could rob bonds of some of their protective features. If stocks decline, and inflation rises, investors may discover some nasty surprises.
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