By Malvika Gurung
Investing.com -- As markets are largely of the view that inflation in the United States is on a steep downtrend, strategists at Goldman Sachs (NYSE:GS) Group have reported otherwise, stating that it is not likely to subside as quickly as currently priced in.
According to Goldman Sachs, the investors’ assumption that a sharp slowdown in economic growth will lead to a rapid easing of price pressures, overlooks the limited ability of certain factors like energy prices to effectively lower prices, along with the potential for a ‘delayed-onset inflation’ in sectors like healthcare, which the markets appear to be ignoring.
Further, the investment banking giant has provided a trading recommendation for those who share their viewpoint that inflation will persist. The firm's strategists suggest that investors should consider buying one-year swaps to bet on inflation exceeding current market pricing, cited a Bloomberg report.
At its June policy meeting, the Federal Open Market Committee paused its rate hike but indicated that rates would still move higher due to persistent price pressures and a strong labour market.
As per the Head of Research at Fundstrat, Tom Lee, price pressures could potentially ease this year, particularly if there is a decline in the shelter or rent component of the CPI. He stated that the stock market seems to be aligning with this view while attributing a significant portion of the year-to-date (YTD) gains to this expectation.