Inflation on a global scale is a real and ongoing concern in the search for yield.
That’s according to Michael Hyman, the Toronto-based president, CEO and CIO of River Plate House Capital Management.
Hyman spoke as part of a panel discussion on the global macro economy at a Toronto event hosted by the Alternative Investment Management Association (AIMA) Canada.
“The things we need are going up, the things we want are going down,” said Hyman. “Sadly, I can’t feed my children flat screen TVs.”
Inflation will only become more of a concern in future, according to Hyman, when the “era of the free lunch” from the Federal Reserve comes to an end. When that time comes, the large money reserves in the United States will be put to use in the economy, he said, sending the money supply velocity higher, which in turn means an increase in inflation.
In the meantime, the current regime of financial repression, such as quantitative easing in the U.S., said Hyman, is creating a domino effect around the world in terms of volatility and inflation.
For example, emerging market economies have seen their currencies rise and fall, have had their interest rates cut and have faced a “tsunami” of inflation. Each of those factors have made things difficult financially for the growing consumer middle class in those countries, Hyman said, and will only continue to do so in future.
Despite the volatility and inflation emerging markets face, Hyman still views those countries as the best chance for investors at finding real returns.
Hyman said Brazil and Mexico were the two counties his firm looks at for real returns because of their expanding consumer middle class.