Chatfeild-Roberts: beware inflation 'illusion'

Jupiter’s John Chatfeild-Roberts believes inflation is higher than the level being recorded and investors should be wary of the threat it poses in the longer term.

The firm’s chief investment officer is the latest in a string of high profile investors to warn on the dangers of inflation, following the likes of Pimco's Bill Gross, who last week told his clients to invest only in short duration bonds because 'inflationary dragons' would soon breathe fire.

Jupiter's Chatfeild-Roberts (pictured) said although inflation can be positive for governments because it reduces the real value of public debt, it ultimately eats away at living standards for those whose income is not inflation protected.

Citing the Keynesian phrase ‘euthanasia of the rentier’, Chatfeild-Roberts warned savers should ‘be under no illusions’ as the long-term effect of inflation on their finances.

‘In my view, the consumer price index under-records the actual inflation experienced by many groups of people, particularly those in retirement,’ he explained.

‘Having exposure to investments that offer some protection against higher prices looks like a sensible precaution.’

He explained large multi-national businesses with strong balance sheets are not as cheap as they were but are still resilient amid the low level of global growth.

Their ability to grow dividends through the economic cycle also makes them an attractive option for those seeking long-term income and inflation protection, he added.

Europe still a key issue

Elsewhere, Chatfeild-Roberts said the bond and equity market rally since the European Central Bank (ECB)’s actions to protect the eurozone from collapse could be sustained, assuming the ECB continues to support weaker economies and the US recovery continues.