Billionaire investor Bill Ackman warned of inflation, discussed bitcoin, and explained why he’s staying in New York City in a recent interview. Here are his 12 best quotes.

Bill Ackman
  • Bill Ackman said inflation won’t be temporary and the economy is at risk of overheating with interest rates this low.
  • The hedge fund billionaire also said cryptocurrency is “fascinating” but he’s not comfortable investing in bitcoin.
  • Ackman also revealed his fund recently acquired a 6% stake in Domino’s.
  • See more stories on Insider’s business page.

Billionaire investor Bill Ackman warned inflation may not be temporary and said the Federal Reserve may have to raise interest rates in a Wednesday interview at the Wall Street Journal Future of Everything Festival. The Pershing Square Capital Management founder also revealed that his fund recently purchased a 6% stake in Domino’s Pizza, sending the shares up as high as 5.9% Wednesday.

Here are 12 of Ackman’s best quotes from the interview, lightly edited and condensed for clarity:

1. “We’ve admired it for years, and it was just never cheap enough. And then for about five minutes, it got cheap. I don’t know who sold or why, but we started buying around $330 a share, and then very quickly it moved up a lot,” on his decision to buy a 6% stake in Domino’s pizza during the pandemic.

2. “The surprise numbers that came out are not due to any weakness in the economy. The economy is crushing it. Businesses are booming. If you think about hospitality, you can’t get a reservation in New York anymore,” on the jobs report that badly missed estimates last week.

3. “There are plenty of jobs, people haven’t had to work partially because of the stimulus…When unemployment benefits step back and some of the stimulus wears off, there will be more of a supply of labor.” He added that raising wages is good for workers and the economy because workers will spend money.

4. “They’ve got a great product, a great value where they do have pricing power. And so they’re able to offset the incremental costs of paying higher wages with charging a little bit more for a burrito. You charge 50, 60, 70 cents more for burrito, you can pay your workers more, and it’s still very good value to consumers. The key in a world where there’s going to be inflation and there’s going to be wage inflation is to have a business that sells a product where there’s pricing power,” on Chipotle raising wages. (Ackman’s Pershing Square owns Chipotle stock.)

5.”I think it’s not temporary….Look at every commodity price right? Copper, lumber, energy even before the colonial pipeline issue. Look at housing prices, look at Bitcoin right? Everything is inflating. That’s driven by a once in a moment history. People are emerging from a pandemic with the endless spirit that comes from being locked up,” on inflation.

6. “I think they’re going to have to raise rates for sure. And I think they adjusted their policy just at the wrong time. Preemptive policy toward inflation I think is a better approach, particularly in a world where we have massive, massive economic stimulus,” on The Federal Reserve.

7. “I think with rates where they are, there’s a very good risk of the economy overheating.”

8.”I think crypto is a fascinating phenomenon. I think it’s a brilliant technology and I kick myself for not understanding it, it’s one of the best speculations ever… But it’s not a place where I would feel comfortable personally putting any meaningful amount of assets in. Therefore I wouldn’t invest our firm’s assets.”

9.”There’s no intrinsic value. Intrinsic value to me is driven by cash generation. You have to be able to build a discounted cash flow calculation,” on why he’s not comfortable investing in bitcoin.

10. “I would be concerned if a friend had a lot of their net worth invested in, in one or more cryptocurrencies, I’d want them to take some money and put it into something a little more durable.”

11. “New York is an extremely desirable place to live. It is a big tax burden and when high-income people do the math and they say, well, I could move to Florida and buy this amazing house and not the state taxes, it motivates some people, but…One of the benefits of being successful is you can choose where you live. So to run away from a location because the tax rate is higher, it seems kind of silly,” on the migration from New York to Miami and his decision to keep Pershing Square in Manhattan.

12. “I think it’s very, very important who the next mayor of New York is, and that we actually have a pro-business mayor. The mayor of Miami has done a great job recruiting technology executives. The next mayor of New York has to do the same thing.” He added that Raymond McGuire and Andrew Yang are both great candidates for mayor.

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Tech stocks need to overcome these 5 walls of worry to prevent a further 7% decline, Fundstrat’s Tom Lee says

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  • The decline in technology stocks has more room to go if five walls of worries aren’t overcome, Fundstrat’s Tom Lee said in a Tuesday note.
  • The Nasdaq 100 could drop a further 7% to its 200-day moving average, Lee said.
  • These are the 5 “wall of worries” tech stocks need to overcome to prevent further downside, according to Fundstrat.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The high-flying technology stocks that dominated returns in 2020 have seen their fortunes reverse so far this year amid a “violent rotation” into cyclical stocks, and there could be more downside ahead according to Fundstrat’s Tom Lee.

In a Tuesday note, Lee warned that the tech-heavy Nasdaq 100 could drop as much as 7% to its 200-day moving average if it doesn’t overcome five “wall of worries.” The index’s 200-day moving average currently stands at 12,438.

“Essentially, growth needs favorable outcomes on 5 of 5 ‘wall of worries’ to avoid further downside, [while] epicenter only needs a favorable outcome on 1 of 5 to work,” Lee explained.

Those walls of worries include inflation fears, higher interest rates, regulation from the Biden administration, a reopened US economy, and an increase in the capital gains tax rate.

“The outcome of these 5 events shifts the balance in favor of one group or the other,” Lee said, adding that epicenter stocks only need a few things to work while tech needs all 5 events to work in its favor due to crowded positioning among investment managers.

A rise in inflation, interest rates, and capital gains taxes would benefit epicenter stocks tied to the physical reopening of the economy relative to technology stocks, Lee said. And increased regulation would hurt mega-cap tech stocks. Finally, because most unrealized capital gains are in technology stocks, a hike in the capital gains rate could spur selling as some investors may seek to lock in a lower tax rate.

And if the Nasdaq 100 gravitates to its 200-day moving average, “there will be a panic out of growth stocks,” Lee said. That’s why Lee recommends investors cut their exposure to tech stocks in half relative to the S&P 500.

“In simple terms, we are saying to cut technology holdings in half and allocate this to epicenter sectors,” Lee said, adding that there is urgency to his message. With technology and the FANG mega-cap tech stocks representing 39% of the S&P 500, Lee recommends clients assign just a 19% weight to the sector.

But in the long-term, Lee sees plenty of upside ahead for the tech sector, and believe bargains will be available if the current decline continues.

Lee said in an interview with CNBC on Tuesday that investors should look at companies tied to the supply chain like semi-conductor equipment manufacturers, and believes that the technology sector will ultimately make up 50% of the S&P 500, “if not more” five years from now.

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The rotation trade is only halfway through, and these 5 sectors will continue to outperform until it’s over, Goldman Sachs says

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The Wall Street bull in the financial district January 22, 2007 in New York City.

  • Goldman Sachs’s Lou Miller said he believes the rotation trade is only “halfway through” in a new Daily Check-In podcast.
  • Miller highlighted the energy, materials, financials, industrials, and consumer discretionary sectors as top performers.
  • He also talked about the effects of inflation and said investors might look to Europe and emerging markets for their “reopening trade” moving forward.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The rotation trade is only halfway through, and the industrial, financial, energy, consumer discretionary, and materials sectors will continue to outperform until it’s over, according to Goldman Sachs.

In a new Goldman Sachs’ “Daily Check-In”, Lou Miller, the vice president of equity structuring and sales strategies, said that he believes the rotation trade is set to continue.

“I think we’re definitely halfway through this trade, but I don’t think we’re close to the end. I think there’s still room for this rotation to continue,” Miller said.

The rotation trade is an ongoing move by investors away from highly-valued growth and tech-related stocks to more value-oriented names.

The reasoning behind the trade involves rising growth and inflation expectations – thanks to vaccines and stimulus – which may lead the Fed to increase interest rates and pull back on asset purchases.

That puts pressure on growth stocks which are valued based on discounted future earnings. When the discount rate changes due to increased interest rate expectations, tech and growth stock valuations are called into question.

A new study released by E*Trade on May 3 illustrates the prevalence of the ongoing rotation away from high-flying tech and growth stocks, even by retail investors.

The top three sectors retail investors entered in April were energy, industrials, and communication services.

Miller highlighted a similar basket of sectors for investors to consider in his recent Daily Check-In podcast

Miller said that the industrial, financial, energy, consumer discretionary, and materials sectors are all set for a strong performance while the rotation trade remains in play.

The VP highlighted the fact that the energy, materials, and industrials sectors make up just 14% of the S&P 500 while tech shares account for double that figure. That also doesn’t take into account that Amazon, Tesla, Facebook, and Google aren’t classified as tech stocks.

Miller said that the low market cap illustrates there is room to run in these sectors even after multiple months of the rotation trade.

When asked which sectors investors have been rotating into and should outperform moving forward, Miller said:

“It’s clearly these commodity-sensitive areas of the market like energy and materials, these real economy areas such as industrials, and the reopening sector such as consumer discretionary and then lastly financials. Financials is one of those sectors that is classically considered value.”

Miller also highlighted the growing effects of inflation on a basket of stocks and said his team is looking for “winners and losers there.”

Looking forward, Miller said investors should consider the reopening trade for Europe and emerging markets and be aware of the effects of Biden’s infrastructure spending and tax increases on American equities.

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Goldman Sachs outlines the 3 biggest risks facing mega-cap tech juggernauts right now – and explains why regulation is the scariest prospect of all

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A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2020.

  • Potential policies from President Biden’s administration represent big risks for mega-cap tech stocks, according to a note from Goldman Sachs.
  • Higher corporate and capital gains tax rates could reduce profits and spur a sell-off by investors who are sitting on big gains, the note said.
  • “The greatest fundamental risk to the continued market leadership of the five largest companies appears to be the potential intervention of regulators,” Goldman said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Mega-cap tech stocks like Facebook, Apple, Amazon, Microsoft and Alphabet face growing risks as President Joe Biden moves forward with his agenda, according to a Friday note from Goldman Sachs’ David Kostin.

Those five stocks represent more than a fifth of the S&P 500 as measured by market value, and for good reason, according to Kostin. The tech giants posted strong growth amid a global pandemic and their underlying revenue streams remained durable as other businesses struggled.

And while valuations appear stretched for the mega-cap tech stocks, fast growth and low interest rates justify them, according to Kostin.

But there are three big risks that these tech stocks are facing over the next year, which could lead to limited upside ahead from current levels, Kostin said.

1. Higher Taxes

Tax reform plans from the Biden administration could dent profits and spur selling by investors, according to Kostin.

Biden has proposed raising to corporate tax rate to 28%, though has signaled that a compromise around the 25% level is possible. That tax hike could decrease 2022 earnings for the mega-cap tech group by 9% relative to analyst estimates, according to the note.

A higher capital gains tax rate in 2022 could also lead to weakness in the tech stocks, as some investors who are sitting on big gains might sell in 2021 to lock in the lower current tax rate.

“The FAAMG stocks have appreciated by $5 trillion during the last 5 years, accounting for 29% of the S&P 500 market cap increase during that time,” Kostin explained.

2. Higher Interest Rates

Low interest rates have supported the valuation of high growth, long duration stocks for more than a decade as investors have learned to cope with near-zero interest rates.

But the trend of near-zero interest rates could be nearing its end, based on expectations from strategists at Goldman Sachs. The bank expects the yield of the 10-year US Treasury will rise to 1.90% by the end of 2021, representing a cycle-high since the pandemic began.

“All five FAAMG stocks have above-average duration compared with the Russell 1000, meaning they are especially sensitive to moves in long-term interest rates,” Kostin explained.

This dynamic was on full display in late 2020 and earlier this year. When interest rates rose sharply from November through March, FAAMG stocks underperformed the S&P 500 by seven percentage points.

“A similar period of rising rates in 2H 2021 would likely hamper FAAMG returns,” Goldman said.

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3. Anti-trust Regulation

“Looking forward, the greatest fundamental risk to the continued market leadership of the five largest companies appears to be the potential intervention of regulators,” Kostin said.

Recent appointments made by the Biden administration suggest there is increased risk of a stricter regulatory regime for the FAAMG stocks, as they “face a laundry list of legal battles and investigations over their market power and competitive practices ranging from commercial litigation to DoJ and FTC antitrust lawsuits to Congressional probes,” the note said.

But investors don’t seem to be worried, as shares of Alphabet and Facebook are both higher since the announcement of higher scrutiny of their business practices.

Goldman said investors could be right, and that any antitrust actions have little to no major impact on the companies, but for now the uncertainty remains a big risk for the companies.

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Billionaire investor Bill Ackman says sustained inflation could be a ‘black swan’ risk for the stock market

Bill Ackman
Bill Ackman.

Bill Ackman said in an interview with Interactive Investor published Thursday that sustained inflation could cause an unexpected tailspin in the stock market.

“I think one of the ‘black swan’-type risks for markets is a real spike in inflation that’s not just a three-month spike, that’s more sustained,” Ackman said. “Also, meaningfully higher interest rates, which I think will affect the discount rates that people use to value companies. And I think those could be countervailing stock-market forces.”

A “black swan” event is a rare and unpredictable event that could have severe consequences.

The Pershing Square Capital Management founder said that the trillions of dollars in stimulus from COVID-19 relief bills and President Joe Biden’s infrastructure proposal, historically low interest rates, and “benign policy” from the Federal Reserve would set the US up for “explosive GDP recovery and probably inflation.”

Ackman said he thought that with the pace of vaccinations, the US would be close to full employment and near all-time low unemployment rates at the start of 2022 – factors for the Fed to change policy.

“I think you could see certainly expectations change as soon as the next few months about how accommodative the Federal Reserve will be,” Ackman added.

Read more: Legendary investor Jeremy Grantham called the dot-com bubble and the 2008 financial crisis. He told us how 4 indicators had lined up for what could be ‘the biggest loss of perceived value from assets that we have ever seen.’

More investors have questioned whether inflationary pressures from the economic recovery will be temporary or have a lasting effect on markets. The Fed has signaled that it will keep its accommodative policy stance, which has long driven gains in stocks. The Fed’s chairman, Jerome Powell, has also emphasized that any rise in inflation would be transitory.

But many on Wall Street have predicted that the Fed will need to change its hand sooner than expected and that it will spook markets. The Wharton professor Jeremy Siegel told CNBC on Friday that the Fed would change its policy stance in 2021 and that it would cause a “day of reckoning” in the stock market.

Ackman recommended investors own businesses with pricing power to combat inflation.

“I think inflation is going to be real, and you’re going to see wage inflation. I mean, everywhere there are ‘help wanted’ signs. It’s very hard to hire people to fill its jobs, particularly with a stimulus package which includes extra unemployment benefits,” the investor said. “So it’s a lot of pressure on wages I think, which I think ultimately is a good thing but could have, again, depending on the nature of the business, could have a negative impact.”

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Billionaire investor Bill Ackman warns that sustained inflation could be a ‘black swan’ risk for the stock market

Bill Ackman
  • Hedge-fund billionaire Bill Ackman said a sustained rise in inflation could be a “black swan” event to markets.
  • He detailed his take in a recent interview with Interactive Investor.
  • Ackman said the US could hit full employment by the end of the year, forcing the Fed to change its policy stance.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bill Ackman warned that sustained inflation could cause an unexpected tailspin in the stock market in an interview with Interactive Investor published Thursday.

“I think one of the ‘black swan’ type risks for markets is a real spike in inflation that’s not just a three-month spike, that’s more sustained,” Ackman said. “Also, meaningfully higher interest rates, which I think will affect the discount rates that people use to value companies, and I think those could be countervailing stock market forces.”

A “black swan” event is a rare and unpredictable event that potentially has severe consequences.

The Pershing Square Capital Management founder said the trillions of dollars of stimulus from COVID-19 relief bills and Biden’s infrastructure package, historically low interest rates, and “benign policy” from the Federal Reserve is setting the US up for “explosive GDP recovery and probably inflation.”

Ackman said that with the pace of vaccinations in the US, the country will be close to full employment and near all-time low unemployment rates at the start of 2022. Those factors are the triggers for the Federal Reserve to change policy.

“I think you could see certainly expectations change as soon as the next few months, about how accommodative the Federal Reserve will be,” Ackman added.

Ackman’s interview comes as more investors begin to question whether inflationary pressures from the economic recovery will be temporary or have a lasting effect on markets. The Federal Reserve has signaled it will keep its accommodative policy stance, which has long driven gains in stocks, in place for much longer. Chair Powell has also emphasized that any rise in inflation will be transitory.

But many on Wall Street are predicting the Fed will need to change its hand sooner than expected, and that will spook markets. On Friday, Wharton Professor Jeremy Siegel told CNBC the Federal Reserve will change its policy stance at some point in 2021, and that will cause a “day of reckoning” in the stock market.

Ackman recommended investors own businesses with pricing power to combat inflation.

“I think inflation is going to be real, and you’re going to see wage inflation. I mean, everywhere there are ‘Help Wanted’ signs, it’s very hard to hire people to fill its jobs, particularly with a stimulus package which includes extra unemployment benefits,” said the investor. “So it’s a lot of pressure on wages which I think ultimately is a good thing but could have, again, depending on the nature of the business, could have a negative impact”

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Ethereum’s path to $40,000, plus 5 stock picks from Baillie Gifford

Hello everyone! Welcome to this weekly roundup of Investing stories from deputy editor Joe Ciolli. Please subscribe here to get this newsletter in your inbox every week.

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Hello and welcome to Insider Investing. I’m Joe Ciolli, and I’m here to guide you through what’s been happening in markets. Here’s what’s on the docket:

If you aren’t yet a subscriber to Insider Investing, you can sign up here.

Have thoughts on the newsletter? Just want to talk markets? Feel free to drop me a line at jciolli@insider.com or on Twitter @JoeCiolli.


How Ethereum could hit $40,000

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James Wang is a crypto investor who covered artificial intelligence for Cathie Wood’s Ark Invest. In an interview, he shared how he first invested in crypto and breaks down his bull case for ether. Wang also laid out a valuation framework that explains how the red-hot cryptocurrency could eventually reach $40,000.

Read the full story here:

Ex-Ark analyst James Wang breaks down his bull case for Ethereum as its token breaches an all-time high of $3,300 – and explains why it could eventually reach $40,000


Stock picks from a Baillie Gifford manager who returned 125% in 2020

Bujnowski, Dave

Dave Bujnowski is an investment manager for the $144.9 million Baillie Gifford US Equity Growth fund, which returned 125% in 2020. Despite growth stocks’ surge in value, Bujnowski thinks investors should look at them now more than ever. He shares 5 stocks set to benefit from the end of the pandemic and a hyperconnected economy.

Read the full story here:

Dave Bujnowski beat 99% of his peers to return 125% last year. The Baillie Gifford investor shares 5 stocks set to benefit from the end of the pandemic and a hyperconnected economy.


2 DeFi trends, plus the bull case for Polkadot

Coins of the cryptocurrency Ethereum stands on a table

Digital-asset VC firm KR1 was an early investor in Ethereum, whose token hit a series of record highs this past week. The founders are now making a big bet on crypto protocol Polkadot and shared their investment case. They also broke down their outlook for DeFi, as well as two projects and key trends to watch.

Read the full story here:

A crypto VC firm that made an early investment in Ethereum is betting big on Polkadot. The founders explain why dot could overtake ether – and flag 2 promising DeFi projects that should be on your radar.


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Stock pick central

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Why the horrid April jobs report was actually great news for stocks

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  • The April jobs report badly missed estimates on Friday, but the stock market promptly hit record highs anyway.
  • That’s because the market is now in a phase where bad economic news is good news for equities.
  • The biggest fear for investors is an inflation spike that prompts the Federal Reserve to tightening monetary policy sooner than expected. The weak jobs report soothed those worries.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bad economic news is now good news for the stock market, as Friday’s horrid April jobs report translated into record highs for the S&P 500 and a spike in tech shares.

April saw an addition of 266,000 jobs, well below the estimated forecast of 1 million. Unemployment rose to 6.1% from 6.0%, bucking expectations for a decline. It was the worst miss since 1998.

But instead of an instant drop in stocks following the April jobs report, the tech-heavy Nasdaq 100 soared more than 1%. And while the more economically sensitive Dow Jones industrial average initially sold off, it quickly reversed into positive territory.

The centerpiece of this apparent disconnect is inflation, which is the biggest risk facing stocks right now, according to a recent Bank of America survey. The worry is that significant rise in inflation will prompt the Federal Reserve to tighten its easy monetary policy, which has long driven bullish sentiment in stocks.

But the significant labor-market weakness indicated by the April jobs report has investors shrugging off inflationary concerns for now. In fact, investors seem to have been emboldened to pile further into tech stocks, which carry the highest and most daunting valuations in the market.

This same dynamic was on full display earlier this week – albeit in inverse fashion – after Janet Yellen’s comments about interest rates needing to eventually rise caused a similarly sharp sell-off in tech stocks.

Going forward, now that the economy doesn’t appear as red-hot as many have thought, inflation expectations decline further. That could, in turn, give the Fed more breathing room to continue its monthly bond purchases of $120 billion and keep interest rates near 0%.

April’s jobs report gives credence to Fed Chairman Jerome Powell’s committment to not even talk about talking about tapering its monthly bond purchases or raising interest rates. Instead, Powell would like to see a string of reports that solidify the idea that inflation is consistently running above its average target of 2% and the economy is near full employment.

Read more: ‘If lumber crashes, stocks might be next’: An award-winning portfolio manager who’s tracked lumber prices for years breaks down why futures hitting a record high of $1,600 is an ominous sign – and shares what investors can do ahead of the eventual crash

There are varying explanations for why more Americans are not rushing back into the job market. The president of the US Chamber of Commerce called for the end of the $300 supplemental unemployment insurance on Friday, arguing that government stimulus programs have disincentivized employees to return to work.

But Fundstrat’s Tom Lee thinks instead, Americans are afraid to get back to work given that the COVID-19 pandemic has yet to be eradicated.

“Many people are still unwilling to ‘risk their lives’ to get a job given COVID-19 fears,” Lee said on Friday.

Whatever it may be, if the weak jobs reports continue, it could result in a jump in wage inflation as businesses are forced to pay top-dollar for workers.

But for now, as evidenced by Friday’s move in the stock market, bad news is good news.

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JPMorgan’s quant guru says stock investors are vulnerable to an inflation shock – and recommends these 5 strategies to prepare

Marko Kolanovic Top 100
  • Investors who’ve spent the last decade profiting from deflationary trades are vulnerable to an “inflation shock,” said Marko Kolanovic.
  • He recommends investors who want to reposition their portfolios for more persistent inflation reallocate bonds to commodities and stocks.
  • The JPMorgan chief global markets strategist also said to buy value names.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Investors who have spent the last few years profiting from deflationary trends may need to reposition to avoid an “inflation shock” to their portfolios, said JPMorgan’s Marko Kolanovic.

The quant-driven chief global markets strategist said in a Wednesday note that with the end of the pandemic in sight, global growth, bond yields, and inflation are picking up. At the same time, it appears federal officials will continue easy monetary and fiscal policies. In just 2021, the new US administration proposed $6 trillion of new stimulus measures, he said.

Against that backdrop, investors who have made money from deflationary trades are vulnerable to inflation risks, Kolanovic said.

“For over a decade, only deflationary (long duration) trades were working, and many of today’s investment managers have never experienced a rise in yields, commodities, value stocks, or inflation in any meaningful way,” Kolanovic said.

The Federal Reserve has argued that any near term inflationary pressures will only be temporary, though Kolanovic said the question that matters most for investors now is whether they’ll prepare for a more serious rise in inflation.

“Given the still high unemployment, and a decade of inflation undershoot, central banks will likely tolerate higher inflation and see it as temporary,” he said. “The question that matters the most is if asset managers will make a significant change in allocations to express an increased probability of a more persistent inflation.”

To reposition a portfolio for the risk of more persistent inflation, he recommends investors shorten duration and reallocate from bonds to commodities and stocks. Although commodity prices have been on a tear as of late, Kolanovic said they’re cheap in a historical context: they’re the only major asset class that has declined in absolute terms over the past decade. He added that commodity indices, such as the S&P GSCI, are “perhaps the most direct inflation hedge.”

Within stocks, the strategist recommends investors buy value names and short low volatility style. Finally he said investors should be cautious ESG factors.

“Investors should be cognizant that by embracing ESG they introduced additional short inflation exposure into portfolios (e.g., via long tech and short energy exposure),” Kolanovic added.

Read more: Dave Bujnowski beat 99% of his peers to return 125% last year. The Baillie Gifford investor shares 5 stocks set to benefit from the end of the pandemic and a hyperconnected economy.

Read the original article on Business Insider

Consumer confidence in stock prices suggest there’s more time left for the bull market, NDR says

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  • Consumer confidence in the stock market has not reached excessive levels, suggesting there is more time left for the current bull market, Ned Davis Research said in a Wednesday note.
  • Consumers’ view on bonds is bearish, which is a hopeful sign for the economy going forward, NDR said.
  • Despite the bullish signals from tamed sentiment toward stocks, record high margin debt serves as a risk for the market.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Many sentiment indicators have shown an excessive amount of optimism towards the stock market in recent weeks, but consumer confidence readings tell a different story, according to a Wednesday note from Ned Davis Research.

US consumers are still skeptical about stocks, according to a survey by the Conference Board. Expectations for a decrease in stock prices over the next 12 months has fallen to a neutral level after being elevated amid the COVID-19 pandemic. The indicator is still far away from reaching excessive levels that would trigger a contrarian sell signal.

This indicator is contrarian in that stocks perform well over the next 12 months when consumers are overwhelmingly bearish on stock prices, and perform poorly when consumer are overwhelmingly bullish on stock prices.

A neutral reading towards stocks for this consumer confidence survey “suggests that the bulls could still have some time” for the rally in stocks to continue, according to NDR.

Another bullish indicator is US consumers’ confidence towards bonds, which has reached a pessimistic level.

“When people get this negative on bonds historically, a lot of the bad news (good news for nominal economic growth) is starting to get priced in,” NDR explained.

But one high-risk warning that should be flashing for stock market investors is record levels of margin debt. While rising margin debt often coincides with rising stock prices, a fast rate of change over the past year has hit a level where stocks have often struggled, NDR warned.

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