Perspectives · Inflation · 2026

Real returns: what your money buys, not what it says

A nominal return is the headline number. A real return is what is left after inflation. If an investment earns 5% in a year when prices rise 3%, the real return is roughly 2%. The difference compounds over time.

Different assets respond to inflation differently. Fixed-rate bonds lose value when inflation rises unexpectedly, because their payments are fixed. Real assets such as property, infrastructure and commodities often have revenues that can rise with prices. Equities tend to be mixed: companies with pricing power cope better.

The period from 2021 to 2022, when inflation stopped being described as transitory, was a reminder of this. Investors who had planned around years of low inflation had to rethink.

When you read any projection, including ours, ask whether the figure is before or after inflation. A good projection says so.

General information only; not investment advice. Read the risk warning.