COVER STORY | To grow or to value?

A question smouldering among investment professionals is whether inflation will take hold around the globe as a by-product of immense fiscal stimulus by governments to counter the economic impact of the coronavirus pandemic. This question is how capital will be allocated in an environment where inflation eats away at purchasing power?

The jury is still out on whether inflation will hit consumers around the world or whether it will be localised in the US, where the administration of President Joe Biden has implemented a $1.9tr (more than five times the size of South Africa’s GDP) fiscal stimulus. The administration is currently negotiating a subsequent $4tr in government funds to spend on physical (such as bridges and roads) and social (such as improved childcare and cheaper college tuition fees) infrastructure.

It is, however, not only the US government that is splurging cash to boost economic output. Member states of the EU reached an agreement to set up a €1.8tr recovery fund to rebuild and modernise the economic bloc’s economy. Italy’s prime minister, former European Central Bank president Mario Draghi, plans to