Your Portfolio Hinges on a Bet on Inflation

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The markets are betting that inflation will soon subside, allowing the Fed to pivot. But if inflation proves persistent, the Fed will have much more work to do, to the detriment of asset prices.

There are two schools of thought on the issue of transitory versus persistent inflation.

One school thinks high rising prices will arrest the inflation surge, thus proving inflation transitory this time.

On the other side of the argument, the BIS warns that inflation can remain persistent.

Both views may be correct. The current surge in inflation may be transitory, but we may be entering a long period where inflation remains moderately above that of the last 20 years.

This article compares the two viewpoints to help appreciate how inflation might behave in the coming months and years. Given the Fed's enormous impact on markets and its extremely hawkish stance due to inflation, a well-reasoned inflation forecast is imperative for investors.