Stocks Wince Because the Stagflation Party Has Arrived by David Haggith for The Great Recession
The past week has been a story of stagflation infecting the US economy while the stock market grimaces as Fed officials express the need to start a gradual pullout from economic stimulus much sooner or face a rapid pull-out a little later. Word on the Street has been that inflation is coming hot and heavy and here to stay:
“Our take on inflation is that — whether it’s structural or transitory — at the very least, this is going to be structurally transitory, and this is not going away anytime soon,” said Hetts, whose London-based firm managed more than $427.6 billion as of June. “Inflation is just one risk in people’s portfolios….” A quarterly survey by UBS Group found that 57% of U.S. investors with at least $1 million of assets to invest think that inflation will accelerate over the next 12 months.
Company mentions of inflation on earnings calls jump to record levels, accelerating as businesses tracked by the S&P 500 index report their latest quarterly results, according to research from Bank of America … with “inflation” mentions soaring about 1,100% year-over-year…. That exceeds the year-over-year jump of 900% that was seen in the previous quarter.
The upward movement we’re seeing in prices is not transitory and big tech will suffer from it, says one financial adviser. “Wages are going up and typically what happens is they just don’t go down over time….” Chris Payne of Payne Capital Management told Yahoo Finance Live. “Even if you’re going out to the grocery store, things are just more expensive. So not only do I think inflation is not transitory, I think it’s here to stay. And I really think it will impact different markets,” he added…. “I think big tech is going to face the biggest headwind when it comes to inflation….” Payne’s comments are in stark contrast with Fed Reserve Chairman Jerome Powell’s repeated comments that inflation is transitory.
Stock benchmarks closed mostly lower Wednesday, after Federal Reserve Vice Chairman Richard Clarida says the economic recovery could prove robust enough to pave the way for higher interest rates in 2023 and fewer bond purchases by year-end.
Investors are struggling to discern the path forward and have lately focused on signs of inflation, which could lead the Fed to lift interest rates.
These are the tales that I’ve said would come to dominate the year. Now they are here.
On the other hand, investor hopes should be buoyed by signs of a collapsing economy. So, that’s good news!
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