In some ways, inflation today is having more of an impact on investors than in the past. Not only is it eating into a bigger chunk of the real yield picture, but the environment for nominal yield expansion to fill the gap is lukewarm at best.
So, although inflation worries are clearly lower now than they were in the past, investors had much more to counteract the rising prices in previous economic environments. This suggests that investors still need to consider inflation when it comes to their decisions, and arguably more so than in the past.
Don’t let a low rate of inflation fool you; focus on real yields to see what inflation’s true impact might be. And by this measure, the effect of inflation might be a bit larger than initially thought.
For more on inflation, make sure to also read our recent piece: How low inflation can still have a big impact on returns.