Wednesday, 21 July 2021 Reading time : 3 minutes

Inflation expectations on the rise
A change in the investment regime, from a more deflationary to an inflationary environment, is just manifesting itself in 2021. The outcome will ultimately depend on how the G7 central banks react if they turn out to have underestimated the inflationary pressures emanating from the pandemic and the subsequent strong economic recovery. After a prolonged period of low inflation, consumer price indices currently stand at 5% in the U.S. and almost 2% in Europe (as of May 2021). While certain market participants are convinced that these growth rates will level off as the economic cycle normalizes, there are also signs that the shortages on the supply side of the economy in par-ticular (raw materials, labor, etc.) could last longer. Our Global Reflation Basket aims to benefit from these inflationary pressures. The basket focuses on companies with strong pricing power or on stocks that tend to benefit from inflation. In an inflationary environment, equities are often relative winners compared to other asset classes, as quality companies are usually able to adjust to inflation.

Overview over the stock selection
Food retailers as well as consumer stocks with strong brands may suffer from unexpected cost inflation in an initial phase, but they can quickly adjust their prices. We also see potential in industrial and IT companies that have a strong market position due to high market shares and margin leadership, leading to relatively high pricing power. Commodity stocks benefit from significantly higher demand for raw materials and price increases in an economic upswing. Financial stocks could also benefit from rising key interest rates due to increased inflation. Very selectively chosen utility stocks benefit in a reflation scenario from inflation-linked yields and cheaper buybacks of outstanding bonds due to rising interest rates.

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Static Tracker Certificate on a Global Reflation Basket

• 2 years duration
• Subscribtion period ends on 30.07.2021
• 100 CHF / USD issue price
• Stock selection made by ZKB Asset Management
• Factsheet CHF
• Factsheet USD