Market Expectations For Inflation Are 'Too Low...Don't Correspond To Upside Risks,' Says Expert

In a recent interview with CNBC’s “Squawk Box,” Kathryn Rooney Vera, the chief market strategist at StoneX, highlighted a concerning disparity between market expectations for inflation and its potential upside risk.

What Happened: Vera pointed out that the market has priced in a “perfect scenario” and not a “soft landing” for inflation, CNBC reported on Thursday.

“I think inflation expectations are too low and don’t correspond to the upside risks to inflation, especially from rise in geopolitical risks, supply and demand issues that will probably push oil prices higher,” Vera said.

“If I’m right and oil surges, we could see CPI move one full percentage move higher year on year, which will complicate the scenario that the markets have currently priced in.”

She also raised concerns about the potential for a recession and an acceleration of risk due to the overheating of the economy. Vera emphasized that the current potential growth in the United States is 1.8%, with third-quarter growth forecast at 3%, indicating an inherent risk. She also highlighted the impact of monetary and fiscal easing, as well as the potential for commodity price increases, particularly in light of China’s significant stimulus efforts.

Vera advised investors to consider protecting their gains, especially in light of the current market complacency.

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Why It Matters: The concerns raised by Vera are particularly relevant in the current economic climate. Despite the recent easing of inflation in the U.S., there are still significant risks that could lead to a surge in prices. This could have a substantial impact on investors and the overall economy.

Rooney Vera’s insights also align with recent calls for companies to consider strategic price cuts to mitigate the impact of inflation. As Jim Cramer emphasized, businesses need to be proactive in addressing inflation concerns, and Rooney Vera’s warnings about potential risks further underscore the need for decisive action.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari