Mispriced Inflation: Crescat Capital

n our view, inflation is the most mispriced macro variable in markets today. CPI growth is 5.1% higher over the last two years, but five-year forward inflation expectations are essentially unchanged. Based on our analysis, structural forces are likely to keep the annual growth rate in consumer prices elevated for much longer and substantially higher than currently priced into markets. If inflation remains stickier than policymakers are expecting, it has profound implications for the valuation of financial assets.