Yet with a recession on the horizon, it’s not so simple. Firms whose products are most at risk of a cost squeeze such as retailers, leisure providers and homebuilders are viewed as being most susceptible to slowing economies, while those with better pricing power, like consumer staples and health care, are trading at big premiums to the broader market as investors flock toward safer havens.
“There’s an inflation recalibration going on and that comes with severe, important consequences from an equity market perspective,” said Wouter Sturkenboom, chief investment strategist for EMEA and APAC at Northern Trust. “Investors are looking at this world through a new lens and it’s more inflation-focused and more risk reduction-focused,” he said in an interview.
In the circumstances, any signs of an easing in prices are likely to be taken positively. “It’s the direction of inflation that matters for share prices,” said…
