June 27, 2022

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CIO’s Big Inflation Fear: ‘We All Begin to Make Bad Decisions’

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(Bloomberg) — It’s not just the damage that high inflation does to consumer purchasing power that worries David Bianco, chief investment officer for the Americas at DWS Group, an investment firm with more than $1 trillion under management. It’s also the bad decisions that distorted price signals inspire throughout the economy.  

Caught between the risks of either a prolonged period of destabilizing inflation or a recession triggered by Federal Reserve efforts to cool off consumer prices, Bianco has a rather cautious outlook on the markets. He says the S&P 500 potentially will fall back to the neighborhood of 4,000 in the near term — a drop of about 11% from current levels — before it rebounds back to record highs. Bianco shared his outlook on the markets in the latest episode of the “What Goes Up” podcast. Below are condensed and lightly edited highlights of the conversation. Click here to listen to the full show and subscribe on Apple Podcasts or wherever you listen.

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Q: Can you lay out how you’re thinking about the market right now?

A: It’s a difficult market right now. You don’t know if you’re going to get burned by inflation or get frozen by a recession — although I don’t expect a recession this year or so. We’re quite concerned about the longevity of this cycle. I feel as if this cycle has aged quickly. It’s aged mostly from very high inflation, much earlier than you typically see in the first couple of years of a new economic expansion. 

The causes, as everybody knows, it’s the pandemic, the supply-chain disruptions from that, the really…

Bloomberg News

2022-04-02 12:06:04

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