Investors may want to hold on even tighter.
Moody’s Analytics Mark Zandi believes Wall Street significantly underestimates the seriousness of an inflation return, and warns that it will affect every corner of the market – from big technology to cyclical trading.
“Inflationary pressures will develop very rapidly,” the firm’s chief economist told OilGasJobz’s “Trading Nation” on Friday. “I do not think there is shelter here.”
Yet recent inflationary turmoil in the street on Friday received a postponement with the key indices ending the week on a positive note. The bullish activity occurred when the yields of the treasury eased.
The S&P 500 is now just 3% from its record high, while the technological Nasdaq achieved 1.55% for the first positive day in four.
Zandi argues that the market is too volatile over rising interest rates. He sees inflation “dead ahead.”
So far this year, the standard yield allocation for ten years has risen by 72%. On Friday, it peaked at 2021 at 1.62%, and then withdrew due to some sluggishness in the February work report.
But Zandi predicts that the labor market will heat up this year and reflect a booming economy.
“We are taking the pandemic down, a load of fiscal support is coming and we have a lot of people sharpening the demand and a lot of savings that they are going to unleash,” Zandi remarked. “Growth is going to be very, very strong – many jobs, falling unemployment [and] wage growth. ‘
Consequently, he warns investors to get used to wild market fluctuations lasting longer than two weeks. According to Zandi, investors in a safe haven do not even offer shares related to the economic recovery.
“These are broad, macroeconomic forces that are going to affect all parts of the market equally,” Zandi said.
His forecast calls for a sideways market for one to three years with eruptions of volatility due to foaming amid rising rates.
“The most important thing is that valuations by historical standards are very, very high,” Zandi said.
The bottom line: A three-year time horizon may not be long enough for investors in this area.
“You have to think for the next five or ten years,” Zandi said. ‘For investors who are more focused on the short term, I think it’s just going to be a very difficult market to navigate, and I do not know that one part of the market will perform meaningfully better than the other. “