Negative long-term US inflation outlook means hedging currently underpriced for insurers and pension funds


Capital markets are underestimating structural changes that will drive US inflation rates upwards, meaning now is a good time for insurers and pension funds to hedge their inflation risk cheaply, according to Tim Drayson, economist at Legal & General Investment Managers.

Despite recent weak economic data implying a positive outlook for US inflation, Drayson outlined several factors pointing to a long-term scenario that was the opposite of these expectations. His five main areas of concern are :

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