Burkhard Varnholt: "Internet has killed inflation"
Why is inflation so low and what is driving the stock market? Find out here.
The world economy is growing and stock markets are rising ever higher. However, inflation and capital market yields remain low. Burkhard Varnholt, Global deputy chief investment officer at Credit Suisse, explains the reason for this discrepancy in a video and why there is hardly any inflation.
- There are three reasons for capital market yields being so low: Digitalization curbs inflation irrespective of economic growth. Demographic aging forces pension funds to invest increasingly higher amounts in long-term bonds. Additionally, central banks will either not shrink their balance sheets at all, or only very minimally.
- Strong economic growth is driving equity markets, however, it is not the only catalyst: Low earnings in bond markets push investors into stock markets. Institutional investors in particular are increasingly shifting from bonds to equities, and they are just at the beginning of this process.
- Inflation might eventually pick up slightly as a result of stable economic growth.