Failing to make money from the UK inflation breakeven rate, and UK index-linked gilt yields languishing at “ludicrous” all-time lows of -2% makes them far too expensive to consider.
“You have to think globally,” he says.
“If you can buy high-quality government index linkers in other markets – we see the most attractive in the US – that’s your best bet.”
He continues: “US inflation breakevens, which had a bump after Trump got elected, stalled at the start of this year and have been declining marginally.
“Recently inflation breakevens in the US were only 1.9%-2% therefore any return above that will give you inflation protection. That’s far more achievable.”
Several commentators have said the timing of Easter may have more to do with the latest print, rather than any major shift in underlying economic direction.
Of greater concern – something to brace for as we enter the inflationary ‘bump’ over the summer – is that consumer spending is reaching a high while saving rates are their lowest-ever levels.
Last month the Office for National Statistics revealed the UK savings ratio had reached its nadir since records began – falling from 5.3% in Q3 last year to 3.3% in Q4.
Capital Economics warned UK household health looked worrying as disposable incomes fell as consumer spending was rising.
Becket warns this is “not sustainable” and “highly dangerous” and says he is amazed by the complacency of the UK consumer.
