But "inflation isn't good for any asset class," he says.
Tom McManus, chief equity strategist at Bank of America Securities, thinks inflation, or put in positive terms, "the ability of companies to pass through rising costs," isn't good for stocks in the current environment.
"Inflation is only good for stocks if they are cheap relative to the underlying asset value, which they're not right now," McManus says.
"Pricing power is great because it helps drive earnings -- until investors realize that the higher discount rate is applied to [stock] prices." For the moment, the bond market has found religion. The yield on the 10-year note has risen 65 basis points in the last two months, even as the federal funds rate has fallen by 100 basis points.
Stocks, led by consumer cyclicals, are celebrating in expectation of an economic rebound. The Fed's indifference to rising inflation is still a blessing, which, if McManus and Wieting are right, could quickly become a curse.
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