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Inflationary pressures worth noting in 2018 The global economy will be the strongest in seven years
347 2020-03-04
In 2018 there is a potential asset price recovery, which presents a key risk that asset prices are undervalued.
Global Purchasing Managers Index (PMI) data shows inflation at the production end is on its way.
Investors expressed concern that inflation will remain modest.
Recently, the data from all over the world have made it clear that the rise in producer prices has accelerated.
This has led bond investors to start betting that consumer inflation may soon arrive, with the breakeven rate for the United States surpassing 2% for the first time in March.
This shift will be a dramatic change for those complacent investors. Over the past few years, despite constant panic rhetoric about rising prices, the economy has been slow to grow, wages have dropped, the technology and demographics have changed, and inflation has been dampened.
Although few believe rapid growth in the near term, even modest increases in prices can have a dramatic effect on market sentiment and change the mainstream media.
Peter Boockvar, chief financial officer of Bleakley Financial Group based in New Jersey, said: "There is a perception that inflation is no longer there."
"But we started to see that there was a lot of talk about inflationary pressures, such as in the PMI survey, where inflation is a key risk in 2018 for the market."
On Wednesday, the latest signs of price pressure emerged.
According to the Institute of Supply Management (ISM), the U.S. manufacturing expansion in December was the fastest in three months in December, breaking records due to the increase in orders and production volume, the strongest manufacturing year since 2004.
The price index rose to 69 from 65.5 last month.
Manufacturing industries around the world say they find it increasingly difficult to keep pace with demand, which could force them to raise prices as this year‘s global economy appears to be the strongest since 2011.
On Tuesday, the PMIs released by China, Germany, France, Canada and the United Kingdom all point to deeper supply constraints.
Another factor that threatens consumer inflation is rising raw material prices for copper and cotton in recent months, bringing the real price of commodities back to their long-term average from a US perspective.
On Thursday, the Bloomberg was up 0.1% for the 15th consecutive month, while oil prices continued to climb from their highest closing level in three years.
There are some emerging signs that consumer inflation is already accelerating.
Last week, the German consumer price index (CPI) was higher than expected at 1.7%.
According to the Minneapolis-based investment firm Leuthold Group, about two-thirds of core national prices in the Organization for Economic Co-operation and Development (OECD) have risen year on year.
Policy makers have noticed that analysts expect the Federal Reserve to raise interest rates three times this year as the Fed cuts its stimulus package.
European Central Bank Executive Board member Benoit Coeure said in December last year that the latest extension of its quantitative easing plan may be the last one.
Robert Sinche, global strategist at Amherst Pierpont Securities, said: "It will be a tougher environment, especially in the bond markets in the second half of this year." He expects the Federal Reserve to raise interest rates four times this year and other central banks will cut interest rates .
For Dennis Debusschere, director of portfolio strategy at Evercore ISI, inflation is a key driver behind the global market gains over the past few years.
According to Debusschere, a stock market rally could be subverted if investor concerns about inflation intensify, triggering a wave of premiums in raw materials - that is, compensation for holding longer-term government bonds in a shorter period of time.
Evercore research shows that price-earnings ratios tend to rise with lower premiums as lower bond yields increase the relative attractiveness of the stock.
Meanwhile, previous Deutsche Bank research showed a 1% increase in the standard deviation for the S & P 500 when it fell 2.5%.
"Wages are also rising as commodity prices rise and capital spending is accelerating, which means investors will have a full-fledged inflation backdrop by 2018." Equities strategists at Jefferies Group LLC, led by Sean Darby, are in Tuesday‘s Wrote in a report
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