1. Inflation Really Is Transitory David Kelly, J.P. Morgan Asset Management chief global strategist, noted that long-term market returns are strongly positive despite being “pretty ugly across the board” so far this year. What happened was simple: inflation remained hotter than the Federal Reserve and markets expected and the Fed decided to tighten aggressively, he said.
Inflation may be turning in the right direction, though.
“This is not your grandfather's inflation, this is not a 1970s inflation again,” Kelly said. “It really is actually transitory,” he added, citing factors including pandemic-related supply chain shortages, China’s zero-COVID policy, Russia’s Ukraine invasion and western sanctions against Russia.
“That has prolonged the inflation rate, but I think it’s important to recognize that it’s not going to last forever, we’re already seeing some signs of inflation turning,” Kelly said, adding that the market may not see it in forthcoming June Consumer Price Index data.
As of Tuesday afternoon, the Bloomberg Commodity Index was down 18% from its June 9 peak, he noted. “We’re seeing prices for commodities fall. I think airfares (have) already topped out. So I do think inflation's beginning to roll over.”