About this episode:
With CPI reaching a 30-year high, inflation remains top of mind for many. In this episode, Chief U.S. Economist Lara Rhame joins Director, Investment Research, Kara O’Halloran to discuss her current inflation outlook. Plus, Liquid Alternatives Investment Specialist Beth Anne Byrne joins to offer ideas to help investors protect their portfolios from rising prices.
Kara O’Halloran (00:05):
Welcome back to FireSide, a podcast from FS Investments. My name’s Kara O’Halloran. I’m a Director on our Investment Research team here. On today’s episode, we are going to talk once again about perhaps the most discussed topic in markets this year inflation, but more specifically with this focus on inflation has come a renewed interest in the investments designed to protect portfolios from rising prices, namely real assets. So we’re going to touch on what real assets are, why investors have historically turned to them, and perhaps most importantly, what a well-designed real assets portfolio looks like in 2021. So with me to dig into all of this, our Lara Rhame, our Chief U.S. Economist, who has been on the podcast quite a few times by now, and Beth Anne Byrne, who is a Liquid Alternatives Investment Specialist here at FS and is making her podcast debut.
Kara O’Halloran (00:52):
Beth Anne Byrne (00:53):
Kara O’Halloran (00:53):
I hear you came with some jokes. I was warned that there were some jokes, so we’ll see. Lara, I want to start with you as always, you know, that’s my M.O., we, along with the rest of the world have talked about inflation a lot this year, quite a few times. So we are recording this in early November. We’re still seeing elevated CPI levels or hearing about supply chain bottlenecks, ports that are full of cargo ships. Everyone told me I’m already too late to have done my Christmas shopping or…
Lara Rhame (01:24):
Well, I need to buy a car so we’re all facing inflation related challenges.
Kara O’Halloran (01:28):
Yeah, exactly. Exactly. So it’s clear that inflation did not prove transitory, at least if we use the definition of a few months, that a lot of people had kind of called for back in the spring. What is your current outlook on inflation? What are you closely watching?
Lara Rhame (01:44):
Sure. You know, to your point, and I think we’re, you know what, I’m going to reiterate this several times, because it’s important to realize that CPI right now it’s 5.4% year on year. And when you exclude food and energy, right, that core CPI number is 4%. It’s the highest since 1991. So if right now the big inflation picture feels different, it’s because it really truly is different. And when you look at inflation right now, you pointed to some really obvious supply bottlenecks that have caused, you know, I do actually have to buy a car. That’s not a joke, unfortunately, but there’s just some acute price pressure on durable goods where we know that there are supply shortages. And we know that there is enhanced demand because of the pandemic. But we’re just kind of seeing it bubbling up from a lot of different areas.