Although inflationary pressures in the United States have significantly eased in the past two years, the work of combating inflation is far from over - factors such as expensive ai technology expenses and nearshore outsourcing may be the reasons behind this situation.

This is the view of Anne Walsh, Chief Investment Officer of Guggenheim Partners Investment Management, who believes that the mid-term inflation rate in the United States could rise to as high as 4%. While the short-term inflation rate is expected to return to the Federal Reserve's 2% target level, she believes this level will not be sustained for long. She manages around $320 billion in assets.

Walsh stated at the Greenwich Economic Forum in Connecticut on Tuesday, "We are in a re-inflation world that we have not seen for some time," and when inflation returns to the Federal Reserve's 2% target, "I don't think they can stay at that level for too long."

In recent months, investors' focus has shifted from inflation to economic growth as price pressures have steadily declined from the peak of 2022. However, after Federal Reserve officials announced a 50 basis point rate cut and a strong non-farm payroll report was released last Friday, concerns about rekindling inflation have resurfaced.

Walsh said, "I think we may be facing a wave of modest inflation." While she does not expect a situation like that of the 1970s (when Federal Reserve officials were struggling with double-digit inflation), inflation will become a "natural component of the paradigm."

Policymakers expect average inflation rates of 2.1% next year, reaching the 2% target in 2026. Economists surveyed by Bloomberg anticipate that Personal Consumer Expenditures (PCE) inflation will average 2% in the first quarter of next year. The median forecast from Federal Reserve officials released last month indicates that they expect the Personal Consumption Expenditure Price Index (CPI) to only rise by 2.3% in 2024.

Furthermore, whether Harris or Trump wins, Walsh expects the presidential election on November 5th to have a significant impact on the markets. She said, "I think 2025 may be a challenging year, and we will definitely see that whoever is elected president next year, their policies will have a huge impact."

To deal with unknown situations, Welch recommends investing in high yield bonds, and holding stocks of financially sound companies. She also likes to invest in infrastructure and real estate, but is cautious about office buildings.

Welch said, "I am always looking for the next possible risk and trying to pay attention to whether a black swan event may occur. It can be said that for most of my career, I have not seen so much contradictory information and rising risks."

Editor/ping