This is my base case as well:
The hottest debate in economics this year has been whether rising prices will be sticky or short-lived. And “team transitory” just got a nod of support from Citigroup. While inflation will likely keep climbing in the next few months, the bank’s strategists led by Scott Chronert are urging clients to start positioning for the decline.
Why? Because the bank’s estimates show that the Federal Reserve reducing bond purchases, coupled with a gradual easing of supply-chain bottlenecks, likely means that core inflation for this cycle will peak in February. So, investors should consider reallocating into sectors like consumer and health-care stocks that carry a negative correlation to changes in consumer prices, the Citi strategists wrote in a note titled “The Changing Inflation Narrative.”
