Mohamed El-Erian: Transitory tag is probably the ‘worst inflation call’ in the Fed’s history — but his firm is using these 3 stocks to take advantage
If a prominent economist is right, the Federal Reserve’s reaction to skyrocketing inflation is going to go down in history — but not in a good way.
The Fed had said for months that inflation was a short-term trend triggered by the COVID-19 pandemic. And while Fed Chairman Jerome Powell recently ditched the “transitory” tag to describe inflation, Mohamed El-Erian, chief economic adviser at asset management firm Allianz SE, says the narrative can still have negative repercussions.
“The characterization of inflation as transitory — it’s probably the worst inflation call in the history of the Federal Reserve,” El-Erian said on CBS’s Face the Nation last Sunday. “It results in a high probability of a policy mistake.”
If the Fed doesn’t act quickly to regain both the inflation narrative and its own credibility, El-Erian warns that the economy could be sent into a recession.
Fortunately, Allianz’s portfolio is stuffed with several inflation-ready stock picks. If you’re looking for a safe way to invest your extra cash, here are three stocks that could keep or grow their value if inflation is here to stay.
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It may not get the publicity it once did, but Microsoft’s tech is everywhere. And the company’s cloud computing expertise should allow it to earn a fair chunk of a market that tech research firm Gartner says could grow to more than $360 billion in 2022.
Cloud computing is both the present and future of business. In companies of a certain size, it’s a must; they simply don’t have the option of cutting back on reliable cloud services — and Microsoft’s Azure definitely qualifies — just because inflation is driving prices higher.
In fact, it was growth in Azure revenue that helped Microsoft smash its revenue target by almost $3 billion in the second quarter of 2021. This year, the company’s stock is up 56%.
You might be able to put off the purchase of a new Windows…