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Global Reflation Basket

Monday, 29 November 2021 Reading time : 2 minutes

A change in the investment regime - from a more deflationary to an inflationary environment - is about to manifest itself in 2021. The outcome will depend on how the G7 central banks react if they turn out to have underestimated the inflationary pressures stemming from the pandemic and the subsequent strong economic recovery. 

After a prolonged period of low inflation, consumer price indices recently stood at around 6% in the US and around 4% in Europe (as of October 2021). While some market participants are convinced that these rates will level off as the economic cycle normalises, there are also signs that the shortages on the supply side of the economy in particular (raw materials, labour, etc.) could last longer. 

Our Global Reflation Basket aims to benefit from these inflationary pressures and focuses on companies with strong pricing power or stocks that tend to benefit from inflation. Thanks to the adaptability of quality companies, equities are often relative winners compared to other asset classes in an inflationary environment.

Food retailers and consumer stocks with strong brands may suffer from unexpected cost inflation in an initial phase, but can quickly adjust their prices. ZKB Asset Management also sees potential in industrial and IT companies that have relatively large pricing power and thus a strong market position due to high market shares and margin leadership.

Commodity stocks benefit in an economic upswing from significantly higher demand for raw materials and price increases. Financial stocks could also benefit from rising 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.

ZKB Tracker Certificate on a Global Reflation Basket (CHF)

  •  Static
  • 18 months Maturity
  • CHF 100 Issue price
  • Selection by ZKB Asset Management
  • Termsheet
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