Cold inflation: why Wall Street is worried

Not few on Wall Street have got the idea of ​stagflation in their heads, that is, of stalled economic growth and rising inflation. From what they understood it is not clear: perhaps they saw the Treasury yield nailed to just above 1.6%, while consumer prices flew 4.2%, well beyond expectations.

Perhaps someone really fears that the US economy, now at peak with estimates of GDP growing by 10% in the second quarter, will slow down dangerously in the coming months. Perhaps it is just one of those impromptu sensations that often seize the operators who often miss the sense of the limit. The fact is that a bit of disturbance is perceived on Wall Street and for some arcane reason the index no longer grows with the boldness of recent months: 20 days without a new record begin to worry. The shadow of stagflation In reality, the alleged fear of stagflation is more in the rash statements of some investor than in the facts. Bank of America analysts register the curious sensation, but refuse to give it weight and in their monthly survey note that fears of subdued growth, coupled with those of high inflation, are shared by just 8% of the 592 large managers. However, the signs of an initial and perhaps momentary unease can be glimpsed in the latest survey by BofA.

Expectations of a stronger-than-expected economy remain high (expressed by 84% of respondents), but the percentage is slightly down from the peak in March. Similarly, the feeling that it could slow the growth of corporate profits in the next 12 months is beginning to take shape with the percentage of optimists falling to 78% from the peak of 84% in April.

Consistent with this scenario, investors would in fact be reducing their exposure to the highest-growth stocks, such as technology, in favor of those of banks, insurance c ompanies, basic consumption and commodities. F o r now it would be only a hinted repositioning, typical, according to BofA, of the final stages of an economic cycle. And it is precisely this consideration that now makes its analysts pessimistic. “In a condition of growing euphoria, of high valuations, of stimulus (fiscal and monetary) at the peak, we believe that the good news has already been highly priced by the market,” writes Savita S u bramanian, head of equities for the American bank.