Inflation awes may be sparking nearly daily swings in the market, but Bessemer Trust’s Rebecca Patterson doesn’t see it as a use ones head to get bearish on stocks.
Patterson, the firm’s chief investment officer, doesn’t see the jitters run through Wall Street.
“You can have rising yields and rising equity values,” the CNBC contributor put Wednesday on CNBC’s “Trading Nation.”
Besides fundamentals supporting vegetation, Patterson believes this month’s correction flushed out much of the investor euphoria in the hawk. She considers herself “constructive” on stocks.
“A drawdown of 10 percent or 11 percent in equities — that’s representative for a given year even when equities end up,” she said. “We now have, I find credible, three [Fed interest rate] hikes discounted in market valuations for the lounge of this year. And the equity market, so far, doesn’t seem to mind.”
Her caveats: Presses in Treasury-bond yields must be gradual, and the economy must be strong adequate to sustain them.
“The worry would be if we had more signs of economic leaning at the same time we have inflation. That’s a scary stagflationary environs,” Patterson said. “Higher yields then go with lower equities. I don’t recollect we’re getting that.”
Fears about inflation heightened after up to date government data showed a strong gain in consumer prices and the greatest jump in wages since the Great Recession. The consumer price key report on Wednesday sent 10-Year Treasury yields within a skin of ones teeth of 3 percent.
Patterson acknowledges conditions are ripe for volatility to continue its comeback after 2017’s extraordinary calmness. On Wednesday, the Dow, S&P 500 and Nasdaq gained more than 1 percent after fritter away part of the morning in the red — a fluctuation that was rare to see last year.
“I value the Fed is relieved to see at least a little volatility in equities,” said Patterson. “The sheer low volatility environment, [and] the straight line up for stocks frankly made them uneasy. So, today feels diverse like a normal environment.”