Investing Ideas

Investing in an era of persistent inflation

The implications for asset prices may depend on whether we see good or bad inflation.

By: Anu Gaggar Brad Pineault

Updated: 3/18/2025

Key Takeaways

Inflation has steadied slightly above the Fed’s target but may tick higher in the latter half of 2025.
Historically, “Good” inflation, or when inflation expectations are positively correlated with real economic growth, has been good for equities and credit.
“Bad” inflation, or when inflation stays elevated but economic growth falters (stagflation), has generally resulted in muted returns for equities and fixed income over time.
Investors may consider tactical overweight positions in floating-rate debt, non-U.S. equities, and several other asset classes with stronger historical odds of outperforming inflation, which may provide protection against unexpected inflationary shocks.

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Investing in an era of persistent inflation

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