CNBC’s Squawk Box: Wrong to assume inflation will come down in 2025, says Michael Landsberg

November 29, 2024

Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, presented his contrarian view on inflation and its implications for markets during his appearance on CNBC’s “Squawk Box.” Contrary to prevailing expectations of declining inflation in 2025, Landsberg emphasized that headline CPI likely bottomed out in September at 2.4% and anticipates it to climb above 3% within the next six months.

His insights delve into the drivers of rising inflation, such as shelter costs, food prices, and commodities, as well as investment strategies for navigating a higher inflationary environment.

Landsberg also shared his bullish outlook for large-cap equities, supported by strong earnings growth, while cautioning against small-cap stocks, which have underperformed over the past three years. He highlighted utilities, energy, and insurance as sectors well-positioned to thrive in the current macroeconomic conditions.

Key Takeaways:

  1. Inflationary Pressures Ahead: Landsberg anticipates a reacceleration of inflation, with headline CPI rising to 3%-3.2% by mid-2025. “I expect six consecutive months of increasing inflation, driven by factors like shelter costs and food prices,” he explained, adding that current market expectations for falling inflation are overly optimistic.
  2. Interest Rates and the Bond Market: Despite recent rate cuts, Landsberg highlighted skepticism in the bond market, with yields remaining elevated. He remarked, “The bond market isn’t buying into the Fed’s narrative. Inflation concerns and stubborn pricing pressures are keeping rates higher.”
  3. Equity Market Outlook: Landsberg remains bullish on large-cap stocks, citing robust earnings growth. “S&P 500 earnings are up 8% year-over-year, and the Nasdaq is up over 20%. That’s a strong environment for large caps,” he said. However, he expressed concerns about small caps, noting their prolonged underperformance. “Small caps have barely moved in three years, making it a tough space for broad investment.”
  4. Sector Preferences: To counter rising inflation and interest rates, Landsberg highlighted sectors with pricing power and inflation resilience:
    • Utilities and Energy: “These sectors are well-positioned to perform in an environment of higher rates and inflation,” he stated.
    • Insurance: Landsberg emphasized the sector’s ability to adjust pricing to maintain margins. “Insurance companies thrive when they can incorporate inflation into their pricing models,” he added.
    • Healthcare: In contrast, Landsberg was less optimistic about healthcare, citing regulatory pressures and margin challenges.
  5. The Role of Rate Cuts: While the Fed may deliver another rate cut in December, Landsberg argued against it, suggesting it could exacerbate economic risks. “Big companies can weather higher rates, but small businesses are far more vulnerable,” he noted, further strengthening his case for avoiding broad small-cap investments.

Landsberg advised investors to align portfolios with sectors that can withstand higher inflation and interest rates while focusing on quality and earnings growth. “This is a stock-picker’s market,” he concluded, underscoring the importance of selective investments in the current macroeconomic landscape.

Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Landsberg Bennett and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.