Karen ward, chief European strategist at JPMorgan (156.28, 1.16, 0.75%) asset management company, believes that US consumers release their pent up savings and set off a huge wave of consumption, which may push the inflation of Qualcomm (140.57, 0.23, 0.16%) and disrupt some parts of the stock market.
Ward said that JP Morgan estimated that Americans accumulated about 8% of the GDP savings in the US during COVID-19, and their spending options were limited.
Ward, a former senior economic adviser to the UK Treasury, said she thought most of the money would be released in the consumer binge. If you add Biden’s $1.9 trillion stimulus bill (about 9% of GDP), it could push up inflation.
“I’m not talking about runaway inflation in the ’70s, but I think the average inflation rate in the next 10 years is more likely to be 3% than 1%,” Ward said
The central consumer price index, the Fed’s favorite inflation indicator, was 1.5% in January.
Ward said that as investors respond to the new situation, rising inflation may lead to some volatility in the stock market. She added that the confusion surrounding the Fed’s tolerance of higher inflation and employment levels would also bring uncertainty.
Wharton said she believed that with inflation rising, US bond yields would rise further and could trigger further volatility in some areas of the market.
She said the Fed’s tolerance of higher inflation and a stronger job market could also cause problems.
“They don’t just want full employment, they want inclusive employment. So what does that mean? ” “I think it might give us some volatility.”
However, Ward said that global stock markets in general are unlikely to have major problems as stronger growth should support corporate earnings.