Odd Lots Viktor Shvets Declares Victory for Team Transitory and the Soft Landing
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Feb 1, 2023 Viktor Shvets, a global strategist at Macquarie Capital, argues that the 'transitory' inflation narrative is gaining traction again, as inflation falls while unemployment stays low. He explores how recent optimism is fueled by China's economic reopening and the potential for a soft landing. Shvets discusses deglobalization and its complex effect on inflation, emphasizing that geopolitical risks may not play out as expected. He also highlights the shifting relationships between central banks and market behaviors amid evolving economic dynamics.
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Shvets's "Team Transitory" Stance
- Viktor Shvets explains his "team transitory" stance, emphasizing that current inflation isn't demand-driven.
- He points to disruptions in goods, services, and labor markets as the primary cause.
Disinflationary Forces
- Unlike past inflationary periods, today's environment has strong disinflationary forces (demographics, technology, inequality).
- These make it hard for inflation to become embedded, as seen in inconsistent corporate and labor pricing power.
Deglobalization and Inflation
- Shvets argues deglobalization won't be inflationary due to decreased labor arbitrage and technological advancements.
- He highlights the U.S.'s re-industrialization with less labor, more automation leading to a flexible cost structure.