From deflation to re-inflation: how to protect your portfolio. (Guest Column).
Publication: Buyside
Publication Date: 01-APR-03
Author: Midanek, Jim ; Pak, John
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The U.S. economy has been through a long cycle of declining inflation leading to the deflation of the last few years.
This cycle has brought interest rates on the long-end down to four percent for the ten-year treasury and under five percent for the long bond. In addition it has reduced long-term inflation expectations implicit in treasury inflation protection securities down to about one percent. It has also resulted in more than a 50% decline in equity valuations.
The Fed has countered the deflationary pressures with an aggressive approach to money supply and the federal funds rate. The funds...
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