Structural inflation, fueled by government deficits, AI investments, low unemployment rates, growing trade barriers and energy disruptions, is reshaping the landscape for markets, according to Fidelity International. “Inflation increasingly appears here to stay, rather than being a short-lived phenomenon,” the investment solutions provider said. According to Fidelity, central bankers “might have declared a premature victory in their battle with inflation,” adding that developed markets are now “suffering their sixth consecutive year of above-target inflation.” Fidelity reckons investors should look to stocks and “the inflation-linked profit streams they provide.” “Within equities, look for businesses that can benefit directly from inflationary trends and structural shortages,” Fidelity said, highlighting that bank equities appear outstanding. “The improvement in Japanese bank profitability has been particularly striking,” it added. There are also opportunities in companies which are benefiting from inflation and scarcity across the AI chain, Fidelity said. Look for firms that stand to gain from mid-term shortages and price inflation driven by growing AI demand, such as South Korean, Taiwanese and onshore Chinese technology companies, as well as power supply businesses from the U.S., Europe and Japan, it noted. As for commodities, gold is preferred “as a store of value, as well as selected metals and mining companies that are critical to structural trends such as electrification,” according to the firm. “Ultimately, diversification is essential during periods of persistent inflation,” Fidelity said.
