Inflation Redux?

Global inflation rates fell quickly after their 2022 peak, but inflation uncertainty lingers in several major markets including the U.S. At the time of writing in September 2026, equity markets appear unconcerned, but bond markets are more circumspect. How should investors be thinking about inflation risk? Can portfolios be made more resilient without making a directional bet on the future path of inflation? And how should investors evaluate the most inflation-resilient strategies? This article updates AQR’s earlier analysis on inflation sensitivities and inflation protection (published just before the 2022 shock), highlighting the benefits of commodities and trend following strategies and how to evaluate different implementations. It asks, "How should you prepare for the possibility of another global inflation shock?"

Inflation uncertainty remains elevated: Inflation fell quickly after the 2022 peak, but stubborn risks remain in many major markets. Stock/bond correlations reached multi-decade highs in 2026. Many investor portfolios are particularly exposed to inflation risk: Stocks and bonds tend to suffer together when inflation strikes, and private assets are unlikely to be immune. AQR's analysis of more than 50 years of data finds that many portfolios are exposed to the same macroeconomic risk. Commodities and trend following stand out as inflation diversifiers: Both have tended to outperform amid rising inflation, and both performed strongly during the 2022 inflation shock. Our analysis suggests they may play a valuable role alongside traditional assets. Trend following is an especially versatile diversifier of macroeconomic risks: While most portfolios prefer stable macroeconomic conditions, trend following has the opposite pattern. It can take long or short positions across many macro-sensitive assets and has tended to thrive in both inflationary and disinflationary bear markets, including both the 2022 inflation shock and the Global Financial Crisis. Improving inflation resilience does not have to mean giving up return, but implementation matters: For commodities and trend following alike, portfolio design and implementation can materially affect both long-term return potential and macro diversification.

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Journal Article - February 28, 2020 This document is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and AQR Capital Management, LLC (“AQR”) to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. This document is not to be reproduced or redistributed to any other person. The information set forth herein has been provided to you as secondary information and should not be the primary source for any investment or allocation decision. Past performance is not a guarantee of future performance. Diversification does not eliminate the risk of experiencing investment losses. This material is not research and should not be treated as research. This paper does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of AQR. The views expressed reflect the current views as of the date hereof and neither the author nor AQR undertakes to advise you of any changes in the views expressed herein. The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Charts and graphs provided herein are for illustrative purposes only. The information in this presentation has been developed internally and/or obtained from sources believed to be reliable; however, neither AQR nor the author guarantees the accuracy, adequacy or completeness of such information. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. Diversification does not eliminate the risk of experiencing investment losses. The information in this paper may contain projections or other forward-looking statements regarding future events, targets, forecasts or expectations regarding the strategies described herein, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different from that shown here. The information in this document, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.