Post-lockdown consumption frenzy can contribute to a sharp rise in inflation, but Ed Jardeni believes the economy can handle it.
After decades on Wall Street, where he implements investment strategies for large corporations such as Prudential and Deutsche Bank, Jardeni sees inflationary pressure as a temporary by-product of massive resumption and historic liquidity. I will.
“People will just keep spending money,” the president of Jardeni Research told CNBC.Trading nation“On Friday. Here, both goods and services meet a lot of pending demand.”
Wall Street confirmed further strong inflation growth last week. Core consumer spending, An important indicator that the Federal Reserve continues by a small margin. April was up 3.1% faster than expected compared to the same month last year.
“When the lockdown restrictions were gradually lifted, I saw a tremendous surge in shopping and shopping releasing dopamine in the brain,” said Jardeni. “Many people just started running. I started shopping. “
At first it was a product, but now it’s a service, according to Jardeni.
“For the open ones, many services have actually been removed,” he pointed out. “Obviously, we see the service open.”
Jardeni expects upward pressure on inflation to continue for at least a few months.
“The economy is recovering in a V-shape and is actually returning to real GDP just before the pandemic,” he said. “There will be a slowdown in the economy from the second half of this year to next year,” he said.
He expects demand to eventually decline, even in the housing market, where prices are skyrocketing.
“I don’t think the growth rates we’ve seen in the last few quarters are sustainable,” said Jardeni.
But when it comes to rent, Mr. Jadeni believes the landlord is becoming more pricing-minded. He has noticed that the rental market is currently shrinking rapidly.
“It looks like the house is out of stock. All these people wanted to buy something affordable, but prices are up 20% compared to a year ago and there are few options. “It was.” I said that many homebuyers simply said, “What do you know, there is no mass. Give up. Let’s stay that way.”
Jardeni, a longtime stock market bull, believes in benchmarks Yields on 10-year government bonds Despite soaring prices, it remains relatively calm.
“In the face of more than expected inflation news and much of the most powerful economic data, it has been surprisingly stable over the past few months,” he said. “I think the bond yield will be 2%.”
That’s not scary enough to scare Wall Street, according to Jardeni, but he predicts that Federal Reserve Board policymakers will start talking about tapering sooner than investors think. I will.As a result, he sees 10-year yield to 2022 is about 2.5% to 3%..
“The world has not come to an end,” Jardeni said. “It will actually return to normal.”
The 10-year yield ended the week at 1.58% and has fallen almost 6% in the last two months.
The economy can cope with a sharp rise in inflation: market bull Ed Jardeni
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