Svmuu, Fidelity International portfolio manager Mike Riddell was skeptical of the prevailing view that global price pressures were easing before the outbreak of the Iran war. His contrarian bet at the time—that inflation was about to rise—has now paid off handsomely.
Months ago, he bought inflation swaps in the U.S. and the UK, essentially hedging against the risk of inflation running higher than expected. This was because he believed that even before the Iran war drove oil prices above $100 a barrel, the bond market (and most of his peers) had significantly underpriced inflation risks.
"Given the multiple rate cuts anticipated by global investors, the risk of conflict in the Middle East was absolutely not reflected in interest rates," Riddell said in an interview. While he has slightly reduced his position, he still holds the inflation swaps. (Jin Shi)