The upward movement we’re seeing in prices is not transitory and big tech will suffer from it, says one financial adviser.
“Wages are going up and typically what happens is they just don’t go down over time. So they don’t temporarily go up and go back down,” Chris Payne of Payne Capital Management told Yahoo Finance Live.
“Even if you’re going out to the grocery store, things are just more expensive. So not only do I think inflation is not transitory, I think it’s here to stay. And I really think it will impact different markets,” he added.
Technology is the sector which could be impacted the most, he said.
“I think big tech is going to face the biggest headwind when it comes to inflation,” said Payne.
“What we call long duration assets like pipelines, commodities — what we call more value based — I think those things are going to benefit from inflation,” he added.
Payne’s comments are in stark contrast with Fed Reserve Chairman Jerome Powell’s repeated comments that inflation is transitory.
‘Inflation screams transitory’
Economists like Stephanie Roth from JPMorgan agree with the Fed.
“Inflation screams transitory when you look at the data,” Roth told Yahoo Finance Live.
“You’re starting to see signs that inflation is cooling. The data isn’t particularly scary to us,” she added.
“Certainly wage pressures have been high recently but we think that that’s driven by a couple of factors,” she added. “Unemployment benefits which are quite generous and are starting to roll off.”
“Concerns around COVID — that’s certainly transitory,” she said. “And then the child care issue also. As school starts to reopen we should see the wage pressures start to subside.”
The core personal consumption expenditures price index (Core PCE, which excludes food and energy) increased 3.5% year over year in June. That’s the highest reading since 1991.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre