- It’s too optimistic to think rate hikes are imminent, Federated Hermes chief strategist says.
- Phil Orlando said, “The market is blowing the whistle out of the graveyard and hoping for the best to happen.”
- He said it could take until late 2024 for inflation to fall to the Fed’s target of 2%.
Inflation may continue to threaten markets for the next two years, despite the recent rally in equities, according to Federated Hermes’s leading stock pick.
Phil Orlando, the investment manager’s chief strategist, said in a recent interview that the jump in stocks following inflationary pressures in October suggests investors were blindly hoping for the best outcome — even if prices were to fall in late 2024. Reserve target. ,
“Right now the market is whistling near the graveyard and we are hoping for the best,” he told Yahoo Finance on Wednesday.
“Our best guess is that we will eventually get back to 2%, but that trajectory could be as late as calendar ’24.”
The consumer price index rose 7.7% less than expected last month, giving markets the strongest signal yet that inflation is starting to fall.
The stock market rallied, with the benchmark S&P 500 rising 7.4% since the October inflation data was released on Nov. 10.
But Orlando said investors don’t realize how sticky inflation can be — higher prices could force the Fed to raise rates above 5%.
“If the Fed raises the fund rate to 5%, let’s say by the end of March, but inflation is still rising, let’s say 6.5 or 7%, is the Fed going to pause and make the heroic assumption that inflation will persist? less grinding?” He asked.
“Frankly, we don’t know what’s going to happen in the second quarter of next year because we don’t know the pace of this drop in inflation,” Orlando said. “So there’s a lot to do, a lot of moving parts.”
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