Inflation is dead. All the recent concerns about rising interest rates, wages and soaring deficits may be significant, but they are overshadowed by more powerful long-term forces. Technology, globalization and demographics are conspiring against the pricing power of companies and individuals.

That’s the view of Ed Yardeni, who began his career as an economist when inflation was raging after earning a Ph.D. at Yale under Nobel laureate James Tobin. Advisors and investors who still fear inflation should ask themselves why deflation-obsessed central bankers around the globe have used every instrument in their toolboxes to rekindle nominal inflation for the last decade—and failed completely.

After spending 20 years as a chief economist, Yardeni shifted gears in 1999 and became a market strategist, but the training gives him insights most strategists lack. He recently published a remarkable book, titled Predicting the Markets: A Professional Autobiography, in which he shares lessons learned in a 40-year career as one of Wall Street’s few original thinkers. Yardeni will be a keynote speaker at Financial Advisor's annual Inside Alternatives and Asset Allocation conference in Las Vegas on September 24.

Via what he calls a Tolstoy, war-and-peace model, Yardeni explains that inflation can surge during wartime, when countries are not trading with enemies, when they are scrambling for raw materials among friends and foes and they are diverting parts of their labor force into the labor market. The peacetimes, which have dominated since the end of the Cold War, increase competition among all producers, and this has exerted downward pressure on goods and prices ever since 1989.

Remember the rolling recession of the 1980s, the bond vigilantes of the early 1990s, the paradigm of the technology revolution in 1993, just before the internet created its own revolution on Americans’ desktops? Yardeni was the observer who coined those terms and others.

Working over the better part of half a century, he started out as a realist. Experience, in turn, transformed him into an optimist. Viewed from the vantage point of a four-decade career that many see as one extended, secular bull market, it’s understandable. “When I got into this business, the Dow was [stuck at] 1,000,” he recalls.

Among the lessons learned, he now recognizes seminal events that were revolutionary game-changers, not mere evolutionary events. The end of the Cold War in 1989 ushered in the era of globalization as multinational companies saw the markets for their products expand dramatically. China’s admission to the World Trade Organization in 2001 was another.

Today, Yardeni believes America in particular is in the midst of an era when technology is transforming the economy in very different ways than it did in the 1990s. Back then, companies were making and buying more computers and that was driving GDP. Now the change is much more profound—and scary.

Technology is a bigger driver of dislocation than free trade, and there is “no business I can’t think of that doesn’t face the threat of being disrupted by a rival using technology.” As a small-business owner who started his own institutional research firm nearly two decades ago, Yardeni believes entrepreneurs are driven by insecurity, not selfishness or greed.

“Our number one worry is that we won’t satisfy our customers, so they will go elsewhere, putting us out of business,” he says. When politicians try to intervene against technology and globalization, the results are likely to be excess capacity, deflation and stagnation. In reality, the best is yet to come despite the understandable grievances of those dislocated.

Yardeni admits he would like to be a believer in supply-side economics, but intellectual honesty requires him to remain a fact-based empiricist, not a “faith-based” dogmatist. That’s why he can’t buy into the expectations of sustained 3% or 4% GDP growth touted by President Trump and his chief economic advisor, Larry Kudlow.

The recent tax cut and increases in government spending will provide stimulus for an economy near full employment, so GDP growth of 3% or 3.5% is certainly possible for a few years. Yardeni says the problem is that once growth gets going at that clip, Americans will just start buying more imports, so money will leave the country. These facts embedded in the global economy are not likely to please the president with his binary perspective on global trade.

Lifting GDP

“Globalization will prevail,” Yardeni predicts. Even though it is under assault from populists and protectionists around the world, the level of investments and the degree of interdependence already sunk into the global economy make it unfeasible for politicians to unwind.

It's possible, in Yardeni’s view, that for all his hyperbolic rhetoric, President Trump could “save free trade from itself.” Multilateral trade agreements “lend themselves to being abused,” and those who aren’t benefiting can easily be convinced they are victims of cheaters by nationalists.

Conditioned by the experience of his long career, Yardeni believes this bull market has a ways to run. If one wanted to, they could view the last 40 years as one extended bull market that took a brief, violent break in 1987 and then went through eight years of hibernation from 2000 to 2008, followed by another sharp but relatively short downturn.

Investors need to moderate their expectations for equities after enjoying 14%-plus annualized returns since 2009. Still, Yardeni remains upbeat, maintaining that the S&P 500 should deliver 7% annual gains, right in line with its long-term averages, between now and 2025. That would take the index from 2,660 in mid-April to 4,271 by 2025. Depending on how the trade issue unfolds, he sees the S&P hitting 3,100 by later this year or early 2019.

Lifting GDP growth in the U.S. above the 2.0% to 2.5% range is not sustainable as long as population growth remains at 0.5% and current demographic trends remain in place, he says. Only a surge in productivity or an increase in immigration could change this in the near term.

So how can equities advance at a 7% rate when the economy has grown at a clip of only 2.35%, as it has for the last five years? Simply put, the economy is not the stock market, and those companies admitted to the S&P 500 represent an elite group of businesses that are bigger and stronger than most U.S. firms, Yardeni notes. When they falter or exhibit pedestrian returns, many are tossed out of the index.

In the short term, certain markets and individual companies can experience anomalies and pockets of outperformance. FANG and Friends are enjoying double-digit growth in a world of 2% growth. How long they continue existing in a rarefied world where the law of large numbers is suspended remains anyone’s guess.

“What’s clear is that they’ve been given a free ride by telling users we’ll give you all our services for free if you let us take your data and sell it,” Yardeni says. “That’s going to be reined in by self-regulation or regulation, but they are generating a lot of cash that they can use to get into other businesses.”

Amazon’s business model confounds Yardeni. “I don’t know why Jeff Bezos does anything but Amazon Web Services,” the hugely profitable cloud business.

For bond investors, the picture isn’t so rosy, but even here Yardeni is no doomster. If inflation remains subdued and the expansion continues, bond investors are likely to earn modest real returns exceeding inflation, though they are unlikely to realize significant capital gains from the asset class.

Over four decades, Yardeni has reached his own conclusion about what’s wrong with the aptly named dismal science. Economists define their discipline as the study of how societies allocate and distribute scarce resources. That Malthusian, zero-sum prism fails to address the dynamics of the modern world.

What modern history reveals is that economics is really about using technological innovations to solve the problems posed by scarce resources. Economics is about creating and distributing abundance, not about distributing scarcity.

As a market strategist, Yardeni believes it’s important to be an investor, not a preacher, and avoid letting one’s own political and economic views color one’s outlook. Since 2009, he has maintained a constructive outlook on equities even though many observers were bellyaching about a phony bubble on a “sugar high” driven by outlandish monetary policies guaranteed to produce hyperinflation, or so the skeptics argue. Many of these same individuals are now unemployed or working in other industries.

When it comes to politics, Yardeni admits he wasn’t “thrilled” with our previous president and certainly “has issues” with the current White House occupant. But more important variables drive markets and economies.

Even a President Bernie Sanders wouldn’t alter his stance. “The U.S. economy has done remarkably well despite Washington’s meddling. It should continue to do so,” he says.