PMorgan strategist David Kelly sees reasons for market optimism in Thursday’s US consumer price index report, with stocks rewarding patient investors and bonds providing a solid capital gain as inflation heads toward 2% by late next year.
“The bond market overall is better priced than it’s been for many, many years and I think there’s a one-time capital gain there as rates come down,” the chief global strategist for JPMorgan Asset Management Inc. told Bloomberg Surveillance. “There are better long-term capital gains to be made still in the equity market.”
Stocks rose and bond yields fell after July consumer pricing data bolstered the view that the Federal Reserve will hold off on raising interest rates in September. Core CPI, which excludes volatile food and energy prices, rose 0.2% for a second month in the smallest consecutive gains in more than two years.
“We’re sort of gathering disinflation in America,” Kelly said. “That’s why I’m so convinced that inflation is going to get down to 2% on its own, with or without any help from the Fed.”
For retail investors, “it shouldn’t be about the next year anyway. With inflation, it takes a little while to come down,” Kelly said. “We’re headed to a place of slow growth which looks quite like a decade ago.”
--With assistance from Jonathan Ferro and Tom Keene.
This article was provided by Bloomberg News.