Revisiting a low growth, low interest rate, low inflation world post COVID-19

Webinar & Q&A

Hosted by Managing Director and Chief Investment Officer, Mark Arnold,
and Deputy Chief Investment Officer, Jason Orthman

High levels of inflation increase uncertainty for both consumers and businesses. High inflation is particularly damaging for holders of long-term bonds. This is because the return of the bond is locked in at the time of purchase and a sustained increase in inflation will result in the real (inflation adjusted) returns declining. Equity holders are generally in a better position because businesses have some potential to lift the prices they charge customers to help protect the real value of their revenue streams. However, there will be many businesses that cannot pass on the cost of inflation and maintain their revenue in real terms.

If our views on inflation turnout to be incorrect, then we believe that allocating capital to high quality businesses that have pricing power and high levels of structural growth will help protect against sustained high inflation levels. Most businesses operate in a competitive industry structure and do not have the value proposition to sustainably increase (relative) prices to consumers. This means the average company’s real earnings power will decline relative to our portfolios.

During our webinar, Hyperion Asset Management’s Mark Arnold and Jason Orthman discussed a wide range of issues including:

  • Our short- and long-term outlooks for inflation and interest rates
  • Why sustained changes in bond yields and discount rates have a one-off impact on valuations
  • Whether growth stocks are overvalued from the recent surge in inflation and long-term interest rates
  • The additional structural headwinds impacting companies globally
  • How Hyperion identifies modern businesses with strong value propositions that can grow revenues and profits organically, regardless of changes in inflation
  • Examples of companies with strong pricing power in an inflationary environment

Inflation is something we think deeply about at Hyperion because long-term stock prices are determined by “real” (inflation adjusted) free cash flow expectations and the relative risk associated with those future cash flows.

Inflation has picked up in the US over recent months, but this is likely to be temporary because it is being driven by strong demand from the cyclical recovery from the COVID-19 economic downturn.

Long-term government bond yields are largely determined by expectations for real economic growth and inflation. Long dated government bond yields have increased over the past year as the economic outlook has improved and inflation expectations have increased. Recently the 10-year US bond yield has risen sharply and is now approximately 1.60% compared to a low of 0.50% last year. It is worth noting that this yield is still considerably lower than the average since the GFC of approximately 2.3%.

Technology innovation and disruption is by its very nature deflationary because it results in better products at lower prices. We believe the world is facing a very high level of innovation and disruption over the next decade. In addition, aggregate demand growth is likely to stay subdued in the long term because of high debt levels, ageing populations, lower population growth rates, rising wealth inequality/hollowing out of the middle class and environmental constraints and disruption.

For the reasons outlined above, we continue to believe that any pickup in inflation over the next year is temporary and unlikely to be sustained over the long-term.

This webinar is your opportunity to hear from some of the most highly respected investment experts in Australia, who have performed through both rising and falling inflation environments and are well-positioned to continue to deliver outperformance over the long term for investors.

If you have a family member or friend who you think would also be interested, please forward this invitation to them.

This webinar is aimed at sophisticated investors looking to learn directly from Hyperion Asset Management’s investment specialists.  It is educational only.

Industry recognised performance

2021 Awards

Our greatest motivation comes from delivering out-performance to our clients but in the pursuit of that we are honoured to be acknowledged with a handful of industry awards. To see all of Hyperion Asset Management’s awards and rating, click here.

About Hyperion Asset Management

Hyperion Asset Management has a 25 year track record of delivering long-term outperformance to clients through investing in high quality equities. We currently manage more than $10 billion for institutional and high net worth clients.

Our primary objective is to protect and grow your capital investment over the long-term through our philosophy of investing in the highest quality structural growth businesses. Our portfolios tend to perform best in low growth and/or decelerating economic environments. We expect our portfolios to produce double digit organic sales and EPS growth over the next ten years compared with the key stock markets that are dominated by old world businesses that will likely be stuck in a very low single digit growth range.


All funds are issued by Pinnacle Fund Services Limited “Pinnacle” (ABN 29 082 494 362 AFSL 238 371). Pinnacle is not licensed to provide financial product advice. Hyperion Asset Management Limited “Hyperion” (ABN 80 080 135 897 AFSL 238 380), is the investment manager of the Fund.

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