Why Inflation is Good for Shares and Property

By Shane Oliver, Head of Investment Strategy & Chief Economist from Oliver’s Insights, AMP Capital, 19th February 2020

Shane Oliver’s latest article addresses the concern that central banks are distorting market forces, leading to overvaluation of prices for assets like shares and property.

Key Points:
  • Shares are vulnerable to a short-term correction.
  • But with inflation low, and as long as recession is not imminent, it makes sense that traditional valuations like PEs are higher than their long-term average.
  • Similarly, it makes sense that property yields are lower than normal, but the fall in Australian housing yields has been extreme relative to commercial property & shares.
  • Key things to watch out for are recession and much higher inflation.