Not All Investments Will Suffer From Inflation — Expert Predicts 'Trillion Dollar' Market Shift, Hard Assets Will Surge

Strategist Larry McDonald has forecasted a significant bull market for assets that are likely to flourish in the face of sustained high inflation.

What Happened: McDonald, the author of the “Bear Traps Report” and former head of U.S. macro strategy at Société Générale, predicts inflation will consistently surpass the Federal Reserve’s 2% target for several years. He anticipates inflation rates to remain between 3%-4% over the next decade, reported Business Insider.

McDonald attributes this prolonged inflation to factors such as reshoring, government stimulus, and a strong labor market. He also emphasizes the inflationary effects of escalating geopolitical conflict, drawing parallels with the stagflation crisis of the 70s during the Vietnam War.

However, McDonald identifies a silver lining for “inflation beneficiaries” – market sectors that will prosper as prices remain high. These include assets like nickel, aluminum, uranium, copper, gold, oil, and gas. He estimates the energy grid alone to be worth around $2 trillion.

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McDonald predicts a significant capital shift from popular growth stocks to hard assets and commodities. “We’re talking about a multi-trillion dollar migration of capital and nobody’s prepared for it,” he said. Despite this, investors expect inflation to return to its long-run target over the next year.

Why It Matters: The prediction comes amid a backdrop of hawkish voices from the Federal Reserve and a historic rally in the S&P 500. The stock market’s long-term bull rally is poised to continue, with the S&P 500 potentially surging by 34% by the end of 2026, according to Bank of America.

However, concerns about inflation persist, with “Rich Dad, Poor Dad” author Robert Kiyosaki recently stating that inflation is winning, following Federal Reserve Chairman Jerome Powell's hawkish inflation commentary.

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Wall Street bull illustration created using artificial intelligence via MidJourney.