-
Some leading market commentators aren't fretting about inflation anymore.
-
They expect prices to rise more slowly later this year, and view deflation as a possibility.
-
Here's what Michael Burry, Cathie Wood, Paul Krugman, Jeremy Siegel, and Tom Lee have said.
Several top-flight investors and commentators were sounding the alarm on high, prolonged inflation only a few weeks ago. Now, some elite market-watchers are predicting prices will rise more slowly in the coming months, and deflation could become the bigger risk.
Michael Burry, Cathie Wood, Paul Krugman, Jeremy Siegel, and Tom Lee have all weighed in on the fading inflation threat in recent days. Here's a roundup of their comments:
Michael Burry
Michael Burry expects American consumers to virtually exhaust their savings by the end of this year, as they continue to save less and borrow more to cover higher food, fuel, and housing costs.
The investor of "The Big Short" fame predicts consumer spending will decline as a result, while retailers will slash prices to get rid of their bloated inventories, slowing inflation in the coming months.
"Deflationary pulses from this- -> disinflation in CPI later this year --> Fed reverses itself on rates and QT --> Cycles," he tweeted, suggesting the Fed might cut rates and ramp up its bond purchases again once the inflation threat fades.
However, the Scion Asset Management boss also suggested that shortages of blue-collar workers, and the surge in onshoring among US companies, could lead to higher long-term inflation.
Cathie Wood
"Inflation has been a bigger problem but I think it has set us up for deflation," Cathie Wood said in a recent CNBC interview.
The Ark Invest chief noted that chronic supply-chain issues, and Russia's ongoing invasion of Ukraine, have fostered higher inflation this year.
However, she asserted that even elite retailers such as Walmart and Target are struggling to get rid of excess inventory, raising the prospect of widespread price cuts and deflation in the coming months.
Wood added that consumer sentiment has plunged to record lows, in part because Americans are bristling at painful inflation. She suggested that trend could also pull down prices.
Paul Krugman
Paul Krugman dismissed the idea that inflation is spiraling out of control in a Twitter thread this week.
The economist and columnist, who won the Nobel Prize for economics in 2008, pointed to Treasury-bond data suggesting investors aren't expecting inflation to remain elevated for long.
"Not sure people realize how dramatically the runaway inflation narrative has now collapsed," he tweeted, citing top investor Bill Ackman's recent warnings about out-of-control inflation and unanchored inflation expectations.