Investing Across a New Inflation Regime

HSBC Asset Management

Research

12 Pages

HSBC Asset Management examines how persistent, more volatile inflation could reshape portfolio construction across equities, bonds, securitised credit and real assets. U.S. PCE inflation has averaged 4.0% since 2021 versus 1.8% previously, while 2022 showed value stocks outperforming growth by roughly four times.

Key Takeaways

Inflation regime shifts: U.S. PCE inflation has averaged 4.0% since 2021, more than double the 1.8% average across the prior 25 years.
Diversification weakens: Equity bond correlations rise to roughly 0.26 in inflationary regimes versus about 0.07 during growth regimes, reducing traditional portfolio ballast.
Value leads inflation: In 2022, value stocks outperformed growth by around four times, while quality and high dividend yield factors also showed resilience.
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