[Milcon Conference] "Inflation and Stagflation Concerns Overstated... Supply Shortage to Last 2 More Years"

'US Version of Davos Forum' Milken Conference Opens
"If the Invisible Hand Works, Deflation May Occur Next Year"
"Despite Possible Market Correction, Long-Term Investment Offers Many Opportunities"

[Asia Economy New York=Correspondent Baek Jong-min]

David Hunt (third from the right), CEO of PGIM, is speaking at a panel discussion at the Milken Conference.

Concerns about inflation were prominently addressed at the Milken Global Conference, often called the "American Davos Forum." Experts acknowledged soaring inflation but assessed that fears of the U.S. economy entering stagflation are exaggerated. However, some opinions suggested that supply chain bottlenecks will persist for the next two years.

At the first program of the Milken Global Conference held on the 18th (local time) in Los Angeles, titled "Global Capital Markets at a Crossroads," panel participants emphasized that inflation is temporary.

Scott Minerd, Chief Investment Officer (CIO) of Guggenheim Partners, said, "I want to introduce the invisible hand. When prices rise, supply naturally increases. The current inflation is a phenomenon caused by supply chain breakdowns occurring during the process of returning to normal. Rather, deflation may occur next year."

◇ "Deflation May Occur Instead" = In response to the question, "Has the monster called stagflation appeared?" Minerd CIO explained, "We should see this as a post-war situation. Inflation rose after World War II and the Spanish flu as well. It is difficult to compare the current situation with the 1970s-style stagflation."

Martin Flannery, CEO of Invesco, also evaluated that "the U.S. is experiencing relatively strong growth, making the possibility of stagflation slim."

Emmanuel Roman, CEO of PIMCO, supported the argument of temporary inflation, stating, "The likelihood of stagflation, which combines recession and high inflation, is extremely low."

David Hunt, CEO of PIGM, emphasized the deflationary effects caused by economic democratization and digitalization. Hunt CEO diagnosed that "economic democratization and digitalization have lowered inflation over the past decade. Even after the COVID-19 situation ends, the same phenomenon will continue for several years," concluding that inflation cannot be prolonged.

Hunt CEO predicted that inflation would fall below 2% around 2024 but assessed that the U.S. housing market situation is different. He said, "There has been a shortage of housing supply over the past decade. House prices will continue to rise for the next two years."

There were opposing views as well. Elizabeth Burton, CIO of the Hawaii Public Employees Retirement System, said, "Because the government has provided a lot of funds, consumption is not decreasing. Inflation is expected to continue for the time being."

Unlike inflation or stagflation, opinions were also presented that supply chain bottlenecks will not disappear easily. In an interview with Bloomberg on the same day, Hunt CEO diagnosed that supply chain issues will be difficult to resolve over the next 24 months. Roman CEO added that when looking out from his office at the Port of Newport in California, more than 90 ships are endlessly waiting to be unloaded.

◇ "Central Banks Will Not Seek Exit Strategies" = Regarding the actions of central banks, Minerd CIO said, "Central banks are effectively moving the financial markets. Financial markets are addicted to Federal Reserve (Fed) stimulus measures," adding, "Central banks are unlikely to seek exit strategies for the time being." Hunt CEO argued that the Fed should proceed with tapering (reducing asset purchases).

Minerd CIO warned about rising inflation and the possibility of U.S. interest rate hikes, stating that although the stock market is shaky and may undergo corrections, there are still many opportunities. He predicted, "The stock market will undergo corrections again, and we may be in a bubble, but there are still many opportunities for long-term investment."

The Milken Conference, known as the "American Davos Forum," was held entirely online last year due to the COVID-19 pandemic, but this year it is being held in a hybrid format combining online and offline events.