In a recent analysis, Wilsons Advisory has asserted that global inflation pressures are showing signs of abating, despite the resilience of the US economy and mounting concerns about the worldwide oil price.
This development carries positive implications for both equities and bonds.
Wilsons strategist, David Cassidy, emphasized that the surge in inflation witnessed during 2021 and 2022 should be viewed as more transient than structural. Cassidy’s assessment suggests that, in the absence of a substantial energy shock, the global inflationary trend is expected to witness a significant downturn over the next 12 months, coinciding with a slowdown in the global economy.
Cassidy stated, “This should be supportive, all things equal, for both equities and bonds.”
While acknowledging the likelihood of slightly elevated inflation rates over the next 5-10 years compared to the period spanning from the global financial crisis (GFC) to the pre-pandemic era due to supply chain restructuring and energy transition expenses, Mr. Cassidy pointed out that the exceptionally high inflation levels experienced in 2021-2022 are likely a thing of the past. This is attributed to the normalization of supply chains and a gradual reduction in global excess demand.
Cassidy issued a word of caution, reminding investors that while their 12-month inflation outlook remains relatively favorable, they should not anticipate a linear deceleration. He also emphasized the importance of not disregarding geopolitical risks linked to global energy prices. Nevertheless, the firm’s fundamental stance remains one of anticipating a significant reduction in global inflation over the course of the upcoming year.
