alt
Welcome
  • Funds

    Products

    • Mutual Funds
    • ETFs
    • SmartRetirement Funds
    • 529 Portfolios
    • Money Market Funds
    • Commingled Funds
    • Featured Funds

    Asset Class Capabilities

    • Fixed Income
    • Equity
    • Multi-Asset Solutions
    • Alternatives
    • Global Liquidity
  • Investment Strategies

    Investment Approach

    • ETF Investing
    • Model Portfolios
    • Separately Managed Accounts
    • Sustainable Investing
    • Variable Insurance Portfolios
    • Commingled Pension Trust Funds

    College Planning

    • 529 College Savings Plan
    • College Planning Essentials

    Defined Contribution

    • Retirement Solutions
    • Target Date Strategies
    • Full-service 401(k) Solution
    • Retirement Income
  • Insights

    Market Insights

    • Market Insights Overview
    • Guide to the Markets
    • Quarterly Economic & Market Update
    • Guide to Alternatives
    • Market Updates
    • On the Minds of Investors
    • Principles for Successful Long-Term Investing
    • Weekly Market Recap

    Portfolio Insights

    • Portfolio Insights Overview
    • Asset Class Views
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Monthly Strategy Report
    • Sustainable Investing

    Retirement Insights

    • Retirement Insights Overview
    • Guide to Retirement
    • Principles for a Successful Retirement
    • Defined Contribution Insights
  • Tools

    Portfolio Construction

    • Portfolio Construction Tools Overview
    • Portfolio Analysis
    • Model Portfolios
    • Investment Comparison
    • Bond Ladder Illustrator

    Defined Contribution

    • Retirement Plan Tools & Resources Overview
    • Target Date Compass®
    • Core Menu Evaluator℠
    • Price Smart℠
  • Resources
    • Account Service Forms
    • Tax Planning
    • News & Fund Announcements
    • Insights App
    • Events
    • Library
  • About Us
  • Contact Us
Skip to main content
  • Account Login
    • Login
    • Register
  • Welcome
    • My Collections
    • Logout
  • Role
  • Country
  • Shareholder Login
Search
Menu
CLOSE
Search
You are about to leave the site Close
J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
CONTINUE Go Back
  1. Home
  2. Insights
  3. Market Insights
  4. Market Updates
  5. On the Minds of Investors
  6. What kind of equities should I own if inflation is rising

  • Share
  • LinkedIn Twitter Facebook Line
  • Print
  • Actions
  • LinkedIn Twitter Facebook Line
    Print

What kind of equities should I own if inflation is rising?

03/12/2021

David Lebovitz

This dynamic should support the outperformance of value relative to growth, with attractive relative valuations acting as an additional tailwind for value outperformance.

David Lebovitz

David Lebovitz

Global Market Strategist

Listen to On the Minds of Investors

03/12/2021

During nearly every client conversation over the past few weeks, there has been some mention of inflation. One camp thinks that significant fiscal stimulus has pushed us to the cusp of a new inflation regime, whereas others believe that structural forces like technology adoption and income inequality will prevent inflation from becoming a problem in the long-run. It is impossible to know which of these views will prove to be correct, but good investors play the hand they are dealt. This begs the question of what types of equities tend to do best against a backdrop of accelerating inflation.

To start, equity markets are forward looking, and therefore tend to exhibit a stronger correlation with inflation expectations, rather than spot inflation. However, some parts of the equity market tend to be more sensitive to inflation expectations than others. As shown in the chart below, the outperformance of value relative to growth has historically exhibited a strong positive correlation to inflation expectations.

Taking a step back, this makes sense – the largest sector weights in value indices are things like financials, industrials, and energy, and the earnings that these types of companies generate tend to be highly levered to the overall pace of economic growth. Inflation can be a symptom of an economy that is operating above its potential; therefore, it makes sense that value stocks tend to outperform their growth counterparts when inflation expectations are rising, as higher inflation should in theory coincide with stronger earnings growth.

The remainder of 2021 should see an acceleration in economic activity, rising inflation, and higher interest rates. In general, this dynamic should support the outperformance of value relative to growth, with attractive relative valuations acting as an additional tailwind for value outperformance. However, clients are starting to ask whether the “reopening trade” has run its course; this does not seem to be the case, as robust earnings growth and further steepening of the yield curve should allow value to continue to outperform.

 

Value outperformance tends to coincide with rising inflation expectations

Relative performance of value vs. growth, y/y % chg., 5-yr., 5-yr. fwd. inflation expectations, %

Sources: Russell, St. Louis Fed, FactSet, J.P. Morgan Asset Management. Data are as of March 11, 2021.

0903c02a82b0c283

EXPLORE MORE

On the Minds of Investors podcast

On the minds of investors

View all
JPM52814_Europe_Web_Header_Olive_Portal_850x240

JPMorgan Value Advantage Fund

Learn more
Stress test portfolios

The best portfolios stand strong when the markets don’t

Stress test portfolios now
Equities Inflation
J.P. Morgan Asset Management

  • Capital Gains Distributions
  • eDelivery
  • Fund Documents
  • Glossary
  • Help
  • How to invest
  • Important Links
  • Mutual Fund Fee Calculator
  • Accessibility
  • Investment stewardship
  • Privacy
  • Proxy Information
  • Senior Officer Fee Summary
  • SIMPLE IRAs
  • Site disclaimer
  • Terms of use
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase
Opens LinkedIn site in new window Opens Youtube site in new window Opens Twitter site in new window

This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor's own situation.

 

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

 

INFORMATION REGARDING MUTUAL FUNDS/ETF:

 

Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download it from this site.

 

J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA  FINRA's BrokerCheck

 

INFORMATION REGARDING COMMINGLED FUNDS:

 

For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.

 

The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.

 

INFORMATION FOR ALL SITE USERS:

 

J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

 

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

 

Telephone calls and electronic communications may be monitored and/or recorded.
Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.

 

If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance. 

 

Copyright © 2021 JPMorgan Chase & Co., All rights reserved