A majority of top investors fear inflation more than any other economic trend.
CNBC’s Delivering Alpha survey found that rising price levels will be the primary pain point for 53% of fund managers in 2022:
We polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the rest of 2021 and next year. The survey was conducted this week.
More than half of the respondents said inflation is their biggest worry for 2022. Thirty percent said the Federal Reserve raising rates at the wrong time is their top concern, while 17% said the economic impact of a lingering pandemic is their No. 1 worry.
Likewise, 55% of investors expect that the stock market will rise by less than 10% next year. Meanwhile, 10% of investors expect the stock market to remain flat, and 18% expect increases between 10% and 20%.
However, rising price levels are driving investors toward the stock market.
“While inflation is a concern and source of volatility, it also makes stocks the most compelling choice among the major asset classes,” BlackRock executive Tony DeSpirito explained. “Individual companies will manage through differently, highlighting the importance of a stock-by-stock approach.”
According to the Bureau of Economic Analysis, the Personal Consumption Expenditures Price Index — which the Federal Reserve uses to chart monetary policy decisions — hit a year-over-year rate of 4.1% in October. More recently, the Bureau of Labor Statistics revealed that the Consumer Price Index is rising at a 6.8% clip — the largest year-over-year increase since June 1982.
Inflation — the decline in purchasing power that occurs as more dollars chase the same number of goods — threatens to slash Americans’ wealth. For instance, the Penn Wharton Budget Model — a nonpartisan public policy research initiative at the University of Pennsylvania’s Wharton School — found that current inflation trends require the average American household to spend around $3,500 more in 2021 to attain the same level of consumption as in previous years.
Although wages are rising, price levels are rising faster, placing pressure on the budgets of American workers. The Bureau of Labor Statistics recently announced that “real average hourly earnings” — a metric that considers the impact of inflation on purchasing power — fell by 0.4% between October and November. Though nominal average hourly earnings rose by 0.3%, the effects were overshadowed by a 0.8% increase in consumer prices.
A recent Fox Business poll shows that a plurality of American voters blame President Joe Biden for the challenges facing the American economy. 47% of respondents believe that Biden’s actions are “hurting” the situation, while only 22% believe they are “helping.” Likewise, 46% believe that Biden’s social spending plan would “push inflation higher,” while 21% believe it would “help lower inflation.”
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Source: Dailywire
