Despite rising yields, $7.9 billion money manager believes inflation comeback worries are premature

RiverFront Investment Group’s Kevin Nicholson believes inflation comeback worries are premature because Treasury yields’ upside is limited.

His latest analysis came as the benchmark 10-year Treasury Note yield hit its highest level in almost ten months.

“The market is preparing for further stimulus,” the firm’s global fixed income co-chief investment officer told CNBC’s “Trading Nation” on Tuesday.” “I see Treasury yields trading in about a 20 basis point span in the short-term.”

On Tuesday, the 10-year yield hit 1.187%, its highest level since March 20. So far this year, it has surged 25% — exceeding Nicholson’s near-term forecast which was between .95% and 1.15%.

But that’s not swaying Nicholson’s longer term call: 1.3% by year-end.

“As long as we don’t get a stimulus package that’s above say, a trillion dollars … I don’t think we will breach our upper end here,” he said.

Nicholson, who has spent almost three decades on Wall Street, manages $7.9 billion in assets. Forty percent of those holdings are in fixed income.

“I’m not worried about inflation in 2021,” he said. “Inflation is going to be a 2022 issue.”

His reason: It comes down to this year’s challenged jobs market.

“We need to see employment pick up, and we need to see wages rise,” Nicholson said. “Once we get wages rising, then we will create more demand with that discretionary income. So for now, we don’t see inflation being a problem in 2021 especially because we still have lockdowns going on periodically throughout the country.”

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