Leading Forecaster: Higher Inflation, Market Correction Coming
IN THIS ISSUE:
1. Inflation Will Rise & Stock Market Will Correct in 2021
2. Consumer Price Index Exceptionally Low For Last Decade
3. Global Macro Monitor Predicts Inflation Will Jump This Year
4. GMM: Potentially Big Economic Contraction Coming In 2021
Overview – Inflation Will Rise & Stock Market Will Correct in 2021
Earlier this month, one of the leading global economic forecasting groups predicted inflation will rise, potentially significantly, later this year, and the stock market will react very negatively. Global Macro Monitor (GMM), one of the world’s most respected (and most expensive – over $2,000 per year) forecasters made this prediction on January 11.
GMM looked at inflation in over 50 countries and found that prices are already moving higher in almost all of them. Thus, they conclude that the trend in higher inflation is already underway, and they expect this trend to continue as the year unfolds. This, they predict, will lead to higher short-term interest rates, and as I will discuss below, the 10-year Treasury Note yield has already risen significantly.
All this puts the Fed in a difficult position. Fed Chairman Jerome Powell has promised on multiple recent occasions that the central bank is committed to keeping its short-term interest rate near zero indefinitely. We’ll see about that.
GMM believes the higher inflation rate and higher short-term interest rates will negatively affect consumer spending and will likely send the economy into a recession later this year. All of these factors will serve to send the stock markets reeling, GMM warns.
I should point out that most mainstream forecasters are not nearly as gloomy as GMM’s latest predictions. In fact, most economists expect another positive year for GDP. It remains to be seen which group is correct, but I’ll summarize GMM’s latest surprising forecast for you as we go along today.