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With many investors focused on when the Federal Reserve will start to increase interest rates as it seeks to tame the fastest price increases in decades, New York University finance professor Aswath Damodaran said Thursday that it's inflation expectations that people should be watching.
“Inflation is too dangerous and consequential a factor in investing to ignore,” he wrote in a thread on Twitter, arguing that those who believe inflation is transitory should continue to “stay the course” and remain invested in growth companies and financial assets.
For those who believe that higher inflation is here to stay, Damodaran suggests a shift to real assets and small cap stocks.
“While we have increasingly given central banks primacy in discussions of interest rates, it remains my view that markets set rates, and while central banks can nudge market expectations, they cannot alter them,” he wrote in a report referenced within the thread.
Read More: NYU's Damodaran Urges Fed To ‘Get Ahead of the Inflation Game'
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