Tariffs, inflation expectations and the outperformance of commodities

Uncertainty about US policy, especially trade policy, has contributed to substantial rises in inflation uncertainty and in the University of Michigan’s measure of long-term US household inflation expectations, which has risen to the highest since 1995.

Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), believes that as tariff threats, inflation expectations and inflation uncertainty rise further, commodities act as a critical inflation hedge as physical assets historically deliver strong real returns when inflation rises, while equity and bond real returns tend to be negative.