Asset allocation with persistent US inflation, awaiting new balances «LMF Lamiafinanza

The latest results of the Consumer Price Index (CPI) report revealed worsening inflationary pressures for the US economy, with core inflation increasing by 0.57% compared to the 0.30% forecast by market consensus. The previous positive data for July, which instead seemed to be beginning to mark a containment of the further increase in prices. The trend of the past three months, which seems to jeopardize the achievement of the target set by US monetary policy, which aims to return inflation to the level of 3% by the end of the year, finds another obstacle to the labor market. Unemployment is at an all-time low and wage growth is still very high according to data from core personal consumption expenditures or the price index for personal spending and consumption.

Despite the proximity of a recession and the difficult path set for the short and medium term, we believe that the possibility of a soft landing is still possible for the US economy next year. We expect the Fed to raise overall rates by 4.25% by the end of the year with a 75 basis point increase expected at the next meeting in September. We find that the doubts revealed by opinion polls regarding the inflationary context accompanied by economic stagnation in the American economic environment, which is characterized by high rates of inflation, low growth and high volatility, can reflect negatively on the valuations of securities, and that this is the case in which high-quality securities that can Invest in them with net inflation-adjusted price and earnings (Shiller Ratio – Robert Shiller Nobel in 2013) to build a portfolio as counter-cyclical and as defensive as possible. In this way, it is possible to notice limited losses and flexibility against the S&P index of low volatility stocks.

Given the prolongation and expected persistence of inflationary pressures, we continue to look for opportunities to invest in stocks that can best follow current trends, such as those in the energy sector, defensive and short-term stocks, along with equity stocks. Companies in sectors, such as banking and insurance, which You can benefit from higher interest rates.