Why portfolios light on inflation protection are vulnerable

It is fascinating how events that initially seem extreme can quickly become commonplace. We have seen this in effect with quantitative easing (QE): what began as an emergency measure soon evolved into routine policy, so it came as a shock to the market when Ben Bernanke announced the Federal Reserve was considering ‘tapering’ its asset purchase programme. Concerns over the inflationary impact of QE are perfectly understandable, although, so far, inflation has remained relatively low in most developed economies, despite an improving economic backdrop. So, what is going on? Well, so far, t...