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CNBC reports that there is a growing body of strategists that believe investors are underestimating the outlook for consumer prices.
David Roche, president of investment firm Independent Strategy, told that he believed the U.S. inflation rate, which stood at 2.6% in March from a year ago, could rise much further.
“My own view is that we will see inflation of probably 3 or 4% by the middle of next year and that is completely inconsistent with, say, U.S. 10-year bond yields being at 1.6%. That yield could easily double and when it does, then you come to the crunch point that markets are going to experience,” he told.
“The reason prices will rise, and really there are a couple of things, is that you’re going to end up with, on the other side of Covid (the pandemic), huge demand as consumers spend the excess savings which they have accumulated,” he said.
“And you’re going to end up with big government forever ... and that of course is less efficient and less efficiency means higher inflation.”
Rising inflation is one of the biggest concerns facing the market right now, as high prices could affect asset values and corporate margins and limit consumer buying power.