Position for Longer-Term Inflation, Investor Says as Stocks Brush Off Higher Consumer Prices

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Investors appear to be brushing off the latest inflationary uptick.

Consumer prices in May rose at the fastest year-over-year rate since 2008, the Labor Department said Thursday, but U.S. stocks aren't feeling the heat.

The S&P 500 instead hit a fresh record high in Thursday's session, ending the day in the green with the Dow Jones Industrial Average and Nasdaq Composite.

That's because investors now know what to expect when it comes to inflation, Joule Financial's chief investment officer, Quint Tatro, told CNBC's "Trading Nation" on Thursday.

"They are starting to understand that a lot of that is transitory" rather than permanent, Tatro said. "When ... you really understand the variables in play, ultimately, it's not all that concerning."

He noted that rising used car and truck prices contributed to May's uptick, a trend tied to manufacturing constraints caused by the global semiconductor shortage.

But while short-term inflation concerns seem overblown to Tatro, there are longer-term catalysts at play, he said.

"We are seeing core inflationary concerns across the board, particularly in the wage inflation environment, so, we are already positioning more into the cyclicals, industrial-type names, value-type names," he said. "Longer term, the inflationary concerns are real and ultimately portfolios should be positioned accordingly."

The technicals appeared to support that thesis, Matt Maley, chief market strategist at Miller Tabak, said in the same "Trading Nation" interview.

After a triple-digit percentage rise in the U.S. 10-year Treasury yield from last August to this spring, it is now the most overbought it has been on an intermediate basis since the mid-1990s, Maley said.

The iShares 20+ Year Treasury Bond ETF (TLT), which measures price and moves inversely to yields, just became the most oversold it has been since its inception in 2002, Maley added.

"It takes a while for those technical conditions to be worked off," Maley said. "As we move into the summer months ... rates will start to move back up because of these higher inflation expectations."

With Dallas Federal Reserve Robert Kaplan and Treasury Secretary Janet Yellen speaking publicly about higher interest rates, investors should be ready for what may ensue Maley said.

"I think they're preparing us for higher interest rates and I do think they're going to be coming," he said.


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