In their latest High-Conviction Views report1, Janus Henderson's Richard Bernstein, Chris Benway, and Michael Talaga make a case that cuts against decades of received wisdom: the era of reliably low inflation is not coming back, and investors who fail to account for that shift are poorly positioned for what comes next.
The Hidden Central Bank
The conventional telling of the post-1990 disinflation story credits the Federal Reserve. Bernstein, Benway, and Talaga argue that attribution is too generous. Thirty years of falling prices were, in their view, primarily a product of globalisation opening markets, intensifying competition, and disciplining corporate pricing ambitions. As Bernstein puts it, "We are talking about a slow, uneven process that could leave trend inflation higher than many investors expect and many portfolios are structured for."
That hidden central bank is now working in reverse. Companies and governments are prioritising resilience over efficiency. Onshoring, supply-chain duplication, and regional economic silos are making local economies more expensive. The Philadelphia Fed Manufacturing Business Outlook Survey, which covers roughly 50 years of US companies' pricing intentions, tells the story clearly: corporate pricing power today is reported as stronger than it was in the late 1970s and 1980s (see Exhibit 1 in the report). The 2018 tariffs were the inflection point.
Genuine Pricing Power vs. Cost Pass-Through
Not all apparent pricing power is the same, and the report is precise on this distinction. The real test, the authors argue, is whether a business can raise prices while protecting volumes, customer relationships, and margins. A company passing through a temporary cost increase but subsequently losing market share does not possess the same pricing power as one whose product remains essential after the price has risen.
The businesses that qualify tend to share a specific characteristic: a moat built on trust or structural advantage. Specialty aerospace parts, semiconductor capital equipment with high switching costs, and irreplaceable luxury brands are cited as genuine examples. Elsewhere, in construction equipment and crop chemicals, thin competitive advantage leaves companies absorbing costs to defend share rather than passing them on. The distinction matters enormously to earnings durability.
Importing Inflation, Removing the Punchbowl
For most of the globalisation era, US core import prices rose more slowly than domestic consumer prices. Economists called it "importing disinflation." The data now show core import-price inflation outpacing core CPI, and this is happening with energy excluded, making a purely geopolitical explanation insufficient. The broader pricing of internationally traded goods has shifted, and the pattern is evident across Europe, Asia Pacific, and Emerging Markets.
The Federal Reserve's room to manoeuvre has narrowed accordingly. For decades, the Fed could cut aggressively in a crisis because globalisation was exerting deflationary pressure that absorbed the inflationary consequences of monetary ease. That buffer has eroded. If secular inflationary forces continue, the authors argue, interest rates may remain restrictive for longer than investors currently anticipate, ultimately forcing more rational capital allocation across the economy.
When Abundant Capital Creates Scarcity
The AI investment boom is presented as a live case study in how speculative concentration can generate inflation rather than deflation, at least in the near term. The physical resources required to support data centre construction are finite. Capital directed toward AI cannot simultaneously finance housing, grid upgrades, or productive capacity elsewhere. The result: capital may be abundant in a narrow group of fashionable investments while remaining genuinely scarce across much of the economy. For disciplined providers of that capital, prospective returns may be attractive precisely because they are unloved.
The credit market data are striking. Year-to-date, major hyperscalers together with Oracle and SpaceX have issued approximately US$250 billion in bonds, more than 2.3 times the full-year 2025 total, with estimates for 2027 reaching US$400 billion. The authors expect this supply to overwhelm demand at current spread levels, extending the investment grade technology sector's underperformance.
Looking Beyond the US
Non-US equities have long been cheaper than US counterparts. What has changed is that a growth story has emerged alongside the valuation discount. Of the more than 200 companies globally projecting long-term earnings growth rates above 25%, only two belong to the Magnificent 7. Nearly 75% of expected growth leaders are now non-US companies.
Five Key Takeaways for Advisors and Investors
- The inflation baseline has shifted structurally, not cyclically. Portfolios built around a 2% norm should be stress-tested against a higher trend rate.
- Pricing power is not universal. Identifying businesses with genuine competitive moats, rather than temporary cost pass-through ability, is now a critical differentiator for equity selection.
- Duration risk remains elevated. Short-duration and floating-rate assets remain relevant; appropriately compensated interest-rate risk should be a central question for fixed income allocation.
- Capital scarcity in unloved areas creates opportunity. Infrastructure, real assets, private credit, and asset-backed finance may offer attractive prospective returns where capital is genuinely scarce, not merely unfashionable.
- Global diversification is no longer just a defensive posture. The non-US growth opportunity is real and well-supported by earnings forecast data. Narrow market leadership in US large caps carries concentration risk that is increasingly difficult to justify on fundamentals.
Footnote:
1 Bernstein, Richard, Chris Benway, and Michael Talaga. "High-Conviction Views: The Return of Pricing Power." Janus Henderson Investors, October 2026, https://www.janushenderson.com/en-us/advisor/article/high-conviction-views-the-return-of-pricing-power/.
