Strategist Larry McDonald has have predicted a significant bull market for assets that are likely to thrive in the face of high and sustained inflation.
What happened: McDonald, author of the “Bear Traps Report” and former head of US macroeconomic strategy General Society, predicts inflation will consistently exceed the Federal Reserve’s 2% target for several years. According to Business Insider, he expects inflation rates to remain between 3% and 4% over the next decade.
McDonald attributes this prolonged inflation to factors such as reshoring, government stimulus and a strong job market. He also highlights the inflationary effects of escalating geopolitical conflict, drawing parallels with the stagflation crisis of the 1970s during the Vietnam War.
However, McDonald identifies a silver lining for “inflation beneficiaries” – market sectors that will thrive as prices remain high. These include assets such as nickel, aluminium, uranium, copper, gold, oil and gas. According to his estimates, the energy network alone is worth around $2 trillion.
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McDonald expects a significant shift of capital from popular growth stocks to durable assets and commodities. “We’re talking about a multi-trillion-dollar capital migration and no one is prepared for it,” he told her. Despite this, investors expect inflation to return to its long-term target over the next year.
Because matter: The forecast comes amid hawkish talk from the Federal Reserve and a historic rally in the S&P 500. The stock market’s long-term bull rally is set to continue, with the S&P 500 potentially up 34% by the end of 2026, according to Bank of America.
However, concerns about inflation persist, according to the author of “Rich Dad, Poor Dad.” Robert Kiyosaki recently stating that inflation is winning, following the chairman of the Federal Reserve Jerome Powellthe aggressive comments on inflation.
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Wall Street bull illustration created using artificial intelligence via MidJourney.
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