A Contrarian Bet on Inflation by Fund Giants BlackRock, Pimco and Vanguard

Although inflation has long fallen short of the Federal Reserve’s 2 percent target for years, some of the biggest funds are betting on the tide turning, according to an article in Bloomberg. “A tight labor market, and the Fed’s willingness to consider putting off raising interest rates this year and letting inflation run hot, are bound to raise expectations and push up consumer prices,” the article says, adding, “That means getting into inflation-protected Treasuries, commonly… Read More

Yardeni Says Inflation is Dead

Market strategist and economist Ed Yardeni says recent concerns about rising interest rates, wages and deficits are “overshadowed by more powerful long-term forces,” according to a recent article in Financial Advisor that shares comments from his keynote speech at an FA conference late last year. Here are some highlights: The era of globalization which was ushered in at the end of the Cold War in 1989 led to Increased competition among producers and caused downward… Read More

How 3% Yields Could Change the Investing Landscape

Rising Treasury yields are “prompting investors to dust off their playbooks for how to trade in an era of relatively higher rates,” according to a recent Bloomberg article. The article cites comments by Jim Paulsen, chief investment strategist at Leuthold Group, who wrote in a client note, “Historically, the stock market has done OK with rising inflation, provided economic momentum was also rising.” Paulsen added that stocks have performed well in moderate economic growth climates… Read More

Is There Good News in Rising Bond Yields?

The rise in bond yields since last month’s market correction could be good news for investors, but the challenge comes in identifying the point at which the trend could be bad for shares. This according to a recent article in The Wall Street Journal. Whereas bond investors previously thought that tax cuts would boost inflation, the article says they now seem to be anticipating a better long-term economic outlook with lower inflation expectations. However, it… Read More

Paul Tudor Jones Says Inflation is Looming

Hedge fund manager Paul Tudor Jones believes that inflation is “about to appear ‘with a vengeance’ and may force the new Federal Reserve chair to accelerate interest-rate hikes,” according to a recent article in Bloomberg. According to the article, Tudor wrote in a recent note to clients, “We are replaying an age-old storyline of financial bubbles that has been played many times before.” He believes that policy makers should have pushed for tightening policy and… Read More

The “Near Perfect” Investing Environment May End Soon

For the past two decades, government bonds have moved in the opposite direction of equities in the short run but have produced similarly strong gains in the long run, representing a nearly “perfect” investment, according to a recent article in The Wall Street Journal. From the beginning of 2000 to the end of 2017, the article says, “holding the latest 10-year Treasury and reinvesting coupons returned 155%, the S&P 500 with dividends 158%, while a… Read More

Pimco Adviser Says Market’s Lack of Fear is Scary

As many expect the current bull market to last longer, Pimco global economic adviser Joachim Fels recently told Bloomberg TV, “The fact that the fear is gone is the main reason why we should be worried.” Fels argues that interest rates could rise faster than expected, pushing up government bond yields, and inflation could bump up. The fact that fear is at a low, he says, “means most investors are now pretty fully invested and… Read More

Low Inflation Consensus May Too Strong

The failure of central-bank models to forecast the slowdown in global inflation “leaves investors in the dark about the most important economic measure today and why it’s so low,” according to a recent article in The Wall Street Journal. Contradictory messages from the bond, equity and commodities markets is “adding to the confusion from central banks struggling with the breakdown of their inflation models,” the article says. The yield curve has been flattening such that… Read More

Copper Better Hedge than Gold

While gold has been the popular inflation hedge over the past ten years, copper was a better bet according to a recent Bloomberg article. “While data show that broad community indexes provided the best bang for the buck during periods of rising costs in the U.S., the red metal stands out. According to the article, for every 1% annual increase in the consumer price index since 1992, copper rose by nearly 18% compared to 5.2%… Read More

What “Trumpflation” Could Mean to Investors

The best scenario for investors is steady and low levels of inflation that ward off deflation but also discourage central banks from hiking rates too rapidly, says a Wall Street Journal article from last month. So far, the article asserts, “Trumpflation” has been embraced by deflation-fearing investors—but shareholders should be “keeping a watchful eye on consumer prices, as they often rise much faster than anticipated.” Richard Turnill, chief investment strategist at BlackRock Investment Institute, argues… Read More