QVMM - Tariffs, Inflation, And Returns: How Investments Respond To Supply Shocks
2025-05-28 11:35:00 ET
Summary
- This post offers a framework for thinking about the effect of tariffs on major asset class returns by estimating asset classes’ response to supply shocks.
- This blog uses a Phillips curve approach to separate inflation’s signal or trend, driven by inflation expectations and the output gap, from noise or the fleeting factors that come and go.
- Having defined non-XFE shocks, we can estimate how major asset classes have responded to them.
By Marc Fandetti, CFA
Tariffs have reclaimed the economic spotlight. But with their timing and magnitude uncertain, investors are on edge. A fascinating history of tariffs and their effects on investment returns is provided by Baltussen et al in a recent Enterprising Investor blog . This blog takes a complementary approach to exploring their possible implications for returns....
Tariffs, Inflation, And Returns: How Investments Respond To Supply Shocks