(Bloomberg) -- While price pressures have eased dramatically in the past two years, the war against inflation isn’t over just yet — and factors from spending on pricey artificial intelligence technology to nearshoring may be to blame.

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So says Anne Walsh, chief investment officer of Guggenheim Partners Investment Management, who sees US inflation climbing back up to as much as 4% in the medium term. While inflation is on track to return to the Federal Reserve’s 2% target in the short run, it may not stay there for too long, she says.

“We’re in a reflationary world for the first time in a while,” Walsh said at the Greenwich Economic Forum in Connecticut on Tuesday. When inflation returns to the Fed’s 2% target, policymakers “should probably take that ridiculous collar off and work within a range because I don’t think that level is something they can stay at for a long time.”

Investors in recent months have shifted focus from inflation to economic growth as price pressures have steadily eased from a 2022 peak. But a blowout jobs report on Friday after policymakers delivered a 50 basis-point interest-rate cut stoked concerns about inflation heating up again.

“We are in this world where I think we can see waves of not-high inflation,” Wash said. While she does not anticipate a 1970s-like scenario when Fed officials battled double-digit inflation — inflation is poised to be a “natural part of the paradigm.”

Policymakers see price growth averaging 2.1% next year and hitting their 2% target by 2026, while economists surveyed by Bloomberg expect PCE inflation to average 2% by the first quarter of next year. Fed officials expect their preferred inflation gauge, the personal consumption expenditures price index, will rise just 2.3% in 2024, according to their median forecast released last month.

Outside of the US, Walsh said she’s skeptical on China’s stock market, even after a powerful fiscal stimulus turned it from a laggard to an outperformer in a matter of weeks.

“If stocks are going up, that’s great, but that’s not really going to make itself seen to the local Chinese investor. However, it’s great for external investors,” Walsh said.

At home, Walsh is bracing for the Nov. 5 presidential election to be consequential for markets regardless of whether Vice President Kamala Harris or former President Donald Trump wins.

“I think 2025 could be a challenging year, and we’re certainly going to see a huge amount of policy impact by either candidate next year,” she said.

To position for the unknown, Walsh recommends investing in high-yield debt and owning companies with sturdier finances. She also likes allocating to infrastructure and real estate but remains cautious about office properties.

“I’m kind of always looking around corners for the next risk to happen and trying to be mindful of whether there’s black swan events out there,” Walsh said. “I would say that in all the years that I’ve been in the investment management business, I haven’t seen quite so much conflicting information and risk that’s rising, for the better part of my career.”

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