Index-linked gilts

aroominyork

tebbins said:
shorter term inflations expectations tend to make the market favour cyclical equities.

Could you please explain this? I thought cyclical equities do well in times of expansion, not when inflation is putting the economy under pressure.

tebbins

aroominyork said:

tebbins said:
shorter term inflations expectations tend to make the market favour cyclical equities.

Could you please explain this? I thought cyclical equities do well in times of expansion, not when inflation is putting the economy under pressure.

They can favour both. Cyclicals are obviously cyclical and so their profits, but not necessarily their stock prices, you would expect to follow some kind of cyclicality. But if there's cost-push or supply-side inflation, you would expect the ultimate supply-side businesses like oil & gas and commodities (i.e. mining) to hold up fairly well. Also since inflation means higher interest rates because apparently that old theory is still believes, and inflation means the assets banks borrow via deposits to invest in, you may expect banks to turn an above-inflation profit too.
But honestly who knows.
Well some people probably know but they're either too rich, clever or both to deign to visit this forum.