Fund manager Richard Bernstein’s theme has been that the US stock market is again a growth market. According to him, whereas investors generally still believe that the emerging markets are a growth story, the data increasingly suggest that growth is now predominantly in the developed markets.
Here is what he wrote about inflation:
“Although it is very popular to say the US is “printing money”, the reality is that US moneygrowth, at roughly 7%, is spot on the long-term average. The broad base of inflation figures beyond the much-maligned CPI consistently show that US inflation remains well under control. Not so in the emerging markets.
Chart 1 shows the current relationship between money growth and inflation among both developed and emerging countries. One can see that the highest rates of money growth and inflation are clearly in the emerging markets, and not in the developed markets.
It is curious that many investors still believe that the “emerging market consumer” is a viable investment theme despite the growing number of protests and riots in the emerging markets.