Sector Strategist Denise Chisholm notes that we’re now seeing a rare occurrence that is inflationary expectations accelerating relative to inflation. For investors concerned about whether inflation is a good or bad thing, she adds that recent history suggests inflation might be better for the market than we think, and the market might expand in terms of multiples expansion, pricing out the risk of deflation. Denise notes that the rapid steepening of the yield curve currently happening is typically the sweet spot for cyclicality in sectors or factors. From a sector perspective, that is anything economically sensitive like financials, energy, industrials and equal-weighted consumer discretionary, and a rotation away from sectors she would classify as classically defensive, such as consumer staples, utilities, big pharmaceutical companies, and to a lesser extent real estate. She thinks this rotation will be a dominant trend over the next 12-18 months.
Recorded on March 8, 2021.