Boockvar: We’re Going to Have Serious Inflation Next Year

Your Real Vision Daily Briefing for June 18, 2020

Ed Harrison joins Peter Boockvar, CIO of Bleakley Advisor Group, to discuss the latest developments in markets, macro, and coronavirus.

  • Inflation doesn’t always mean a rise in consumer prices for things like groceries, tuition, and utilities; we’re seeing inflation in asset prices right now as a result of the Fed’s easing.
  • S. investors are dependent on the idea that the Fed will always save them, but a “don’t fight the fed” mentality doesn’t always work out in the long term.
  • Asian markets and commodities are where investors could see opportunities for returns over the next couple of years.

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We may not be seeing widespread consumer price inflation, but we are in the midst of significant asset price inflation as a result of the Fed injecting so much liquidity in the market, Peter Boockvar, CIO of Bleakley Advisor Group, told Real Vision during today’s Daily Briefing.

Inflation is in the eye of the beholder, he said. An individual investing in a 401K at the current inflated prices will likely see a rate of return over the next 10 years that is very subdued, which will hurt them financially the way that price inflation would.

Boockvar said that monetary inflation created by central banks is the tinder for price inflation and he thinks that eventually the Fed’s easing will cause the demand side to overwhelm the supply side and lead to some serious inflation next year.

The Fed’s actions are also contributing to the pervasive attitude that stocks have a hall pass. Right now, bad economic numbers mean nothing because investors understand that the rebound is predicated on trading the immediate reopening, not where we’ll be in the longer term.

The “don’t fight the fed” mentality doesn’t always work, he warned, noting that the Fed failed to save the day and prevent stock from falling 50% in 2000-2002 and again in 2007-2008.

Boockvar said he expects this hall pass will expire in late summer and that’s when we can reassess what the economy really looks like. He wants to see the economic data after everything has been open, not during the phased reopening – bad news doesn’t matter again until after things reopen, he said.

Looking forward, he believes that time horizon is important, value will have its day, and there are potential opportunities in Asian markets and commodities.

Boockvar likes Asia because Asian countries have better control over the pandemic, which means their economies will suffer less and they’ll take on less debt as a result. In commodities, he thinks there will be supply and demand imbalances as global demand increases and strains already damaged supply chains over next few years, and he believes this will be reflected in prices.