Current markets continue to be underscored by inflation fears as well as labor market recoveries across most states as people return to work. However, according to Jay Hatfield, founder, CEO, and portfolio manager at InfraCap, the risk of stagflation in 2022 is the most pressing issue facing markets right now.
“I think [the Taliban takeover of the Afghan government] maybe caused a little bit of weakening, about maybe 10 handles in the S&P,” Hatfield told Yahoo Finance Live. “But the dominant risk right now we see is really stagflation in '22 and that the Fed has lost control of inflation.”
Hatfield noted that it is likely the Fed will need to raise interest rates at least twice in 2022 because of where the brunt of inflation is coming from, which is the housing and consumer durable sectors. Ultimately, it is Fed Chair Jerome Powell who holds the “smoking gun” on inflation, he said.
“So not only did you see the images from Afghanistan, you also had reporting that not just [James] Bullard and [Robert] Kaplan, which tend to be the thought leaders on the Fed, but other members are realizing that inflation is out of control and are likely to accelerate the taper,” Hatfield added.
Hatfield joined Yahoo Finance Live to discuss the current outlook on inflation in the U.S. as well as monetary policy expectations from the Fed. InfraCap is an SEC-registered, New York City-based investment adviser that manages ETFs and a series of hedge funds.