He opined that while myriad uncertainties stalk equity markets in 2017, the prospect of higher inflation will be certain.
Frost said that the policies of Donald Trump will be ‘inflationary in an already hot economy.’
The veteran investor remarked that markets traditionally look to certain sectors as beneficiaries of rising inflation, because they have pricing power.
One of those sectors is retail, due to there being a constant demand for the products sold.
But Frost commented that while retailers, ranging from supermarkets to clothing outlets, are faced with higher costs as they buy imported goods, and pay the living wage, but will struggle to pass the higher costs onto customers due to heavy competition.
Of the food retailers he noted that internet-only firms such as Amazon will not be as impacted by the higher costs, and as they grapple to win market share, are unlikely to put prices up.
That should restrict the ability of bricks and mortar retailer such as Tesco to put pitches up.
Frost noted that online only clothing retailers such as boohoo.com and Asos will similarly feel less pressure to raise prices, damaging the more traditional clothing retailers.
The fund manager concluded his comments with the remark that some investors had positioned their portfolios for low inflation in so resolute a manner that ‘they don’t know what it’s like anymore to own a bank’, whilst he has maintained a very diversified portfolio which has long included investment in banks.
Bank shares have marched stoutly upwards since markets have begun to revise their outlook for global inflation.
The Artemis Income fund has returned 69 per cent over the past five years.