According to Mislav Matejka, global equity strategist of JP Morgan Securities Plc
Well, this is one of the more contrarian views out there and certainly one that gives more perspective on what the other side of the story could be.
Matejka argues that fears about rising inflation and wage growth crimping corporate profits are way overblown. And that it is the outlook for both production and sales volumes rather than higher wages that determine the impact on profitability.
Matejka also mentions that he doesn't expect weaker growth any time soon in any case, and says that "investors should only sell when production and revenue growth begin to disappoint".
His stance of being bullish on stocks remains, citing that the asset class "provides a natural hedge against inflation" by producing nominal earnings and sales growth. The note also mentions that equities tend to produce their best returns with inflation between 1 and 3 percent, which is what JP Morgan is forecasting currently.
To some extent he's not wrong at the moment, equities have took a hit in the wake of the recent concerns on inflation and rising wages, which was reflected in bond yields, but has since bounced back in impressive fashion.
But of course, this is one viewpoint to look at things, and it may not be what the market sees. However, always good to have two sides to everything. Otherwise, we'd have no market at all.
