A Year After Coronavirus Meltdown, Few Investors See Risk of Deflation: Deutsche Bank

Inflation remains a key focus, according to a survey of global investors, although risk of a "Fed taper" appears low.

AccessTimeIconApr 26, 2021 at 9:02 p.m. UTC
Updated Sep 14, 2021 at 12:46 p.m. UTC

Think back to April 2020, when coronavirus-related lockdowns were hitting the global economy hard, and only the most sanguine optimists – and politicians – saw any likelihood of a rapid reopening and rebound.

At that point, the risk of deflation loomed large in the minds of many investors because of the steep drop-off in consumer demand. Prices for bitcoin, (BTC), seen by some cryptocurrency traders as a potential hedge against inflation, stagnated below $10,000, even though central banks around the world were printing trillions of dollars of fresh money.

A year later, the mentality has changed radically: With vaccines rolling out and economists now projecting a buoyant recovery, four in five investors see inflation as far more likely than deflation, according to a new survey by German lender Deutsche Bank.

It's the second month in a row investors have logged such an overwhelming position, and so the idea appears to be sticking. Perhaps not coincidentally, bitcoin prices are now over $50,000.

“A vast majority (81%) agree that inflation is more likely after the pandemic while only 10% thought we would see deflation,” according to Deutsche Bank. The survey was conducted earlier this month and covered about 700 global investors.

Some 43% of investors responded that higher-than-expected inflation and rising bond yields pose the biggest risks to market stability, according to Deutsche Bank.

  • Most respondents see U.S. inflation averaging above the U.S. Federal Reserve’s long-term target of 2%, but remaining under 3%.
  • About 61% respondents saw no risk of major market convulsions this year due to any plans by Federal Reserve officials to taper their asset purchases of $120 billion per month.
  • In 2013, a Federal Reserve-induced “taper tantrum” sent traditional markets into a tizzy.
  • Some 21% said a taper tantrum would happen this year, while 18% said they didn't know.
CoinDesk - Unknown

CoinDesk - Unknown

Chart shows a majority of respondents do not expect a Fed taper to be a major market event.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.