Fund manager viewpoint: End of the bond run

Risk averse investors have allocated huge amounts of capital to bonds over the past two years, based on low cash rates and a potential deflationary environment. Despite high unemployment and a weak economy, the UK has experienced quite high and persistent inflation. The Retail Price Index (RPI) is up 4.7% over the past year. This is before the increase in VAT, which will push inflation higher in 2011. With the printing of money, quantitative easing and the destruction by many governments of their currency’s purchasing power to gain short-term competitive trade advantages, we expect infla...