Morgan Stanley sees a 'trifecta' driving inflation higher — but Bessent says disinflation is weeks away

Morgan Stanley sees a 'trifecta' driving inflation higher — but Bessent says disinflation is weeks away Aditi Ganguly Wed, May 27, 2026 at 9:45 PM GMT+2 9 min read Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. Wall Street and Washington appear to be, once again, out of sync. Morgan Stanley, last week, sent up a red flag to investors that inflation was likely going to be much worse (1) over the next few months, with the normal summer surge, the war in Iran and a lag in housing inflation measures putting pressure on prices.

Top Picks Here’s how to get rich from rising US property values with as little as $100 — and without the stress of angry tenants Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s how to fix it ASAP Goldman Sachs used to hoard prime real estate deals for the ultrarich. Two ex-analysts just opened the door for $250 At the same time, though, Treasury Secretary Scott Bessent said he expects price pressures to ease soon and expects we'll then see a period of "substantial disinflation" (2). It is, of course, not uncommon for Wall Street analysts to have a viewpoint that's entirely different from the current administration.

Analysts are responsible for helping people make more money. Administrations always want to find a positive spin on the economy to help boost approval ratings and enhance re-election chances. But this is a rare case of where both sides could be telling the truth, even if those viewpoints seem to conflict.

It's all about the peak The central issue Bessent and Morgan Stanley converge on is when we'll hit peak inflation. Morgan Stanley says it will occur in May or June. That's because of three key factors: tariffs, which haven't fully been factored into core prices yet; continuing energy price spikes, due to the war in Iran; and inflation from the housing market, which we're still getting a handle on thanks to the federal shutdown last fall.

"You still have kind of a — what I call a trifecta here," Michael Gapen, the bank's chief US economist, told reporters, adding that he believes the US is currently experiencing "peak pressures" when it comes to inflation. Bessent, speaking with CNBC, agreed that the market is likely to see one or two more “hot inflation numbers," but then, he said, "I think we’re going to see substantial disinflation. " The U.

S. will continue to pump oil to ease supply issues from the Iran war, Bessent said, which he sees as the primary problem. Before the military action, he notes, core inflation was coming down and he expects it will again.

(The Consumer Price Index, it's worth pointing out, has been increasing steadily since January. ) Read More: Here’s the average income of Americans by age in 2026. Are you falling behind?

The Fed question Kevin Warsh has taken over as Chairman of the Federal Reserve, replacing Jerome Powell and many market observers believe he will be much more open to Donald Trump's forceful calls to reduce interest rates. Story Continues The hurdle, however, is he can't do that on his own — and the Fed's Board of Governors indicated at the last meeting that they're disinclined to do so. Morgan Stanley says that the trifecta of issues it listed would likely prevent the Federal Reserve from cutting interest rates for quite some time, likely for the entirety of 2026.

That tracks with other forecasts. Morningstar, in a recent report, wrote: "We agree that a cut in 2026 is highly unlikely. We don't expect rate cuts to resume until 2027" (3).

Bessent didn't offer an estimate on when he thinks the Fed might cut rates, but did say he felt this period of inflation was different from the one we saw in 2020-2021, which is when the Powell Fed came under fire for tightening policy too late to prevent inflation from soaring. "We'll get to the other side of this and I don't know whether it's a few days or a few weeks and energy inflation will come back down," he Bessent. Hedge your portfolio against inflation While the Federal Reserve kept interest rates unchanged at its latest meeting late last month, cracks are starting to show among policymakers over where rates should go next.

In fact, the meeting featured four dissenting votes — the highest number in more than three decades (4). Three regional Fed presidents pushed back against language suggesting future rate cuts could be on the horizon, arguing officials should instead keep the possibility of additional hikes on the table, if inflation continues to accelerate. That debate comes as inflation continues to run hotter than many Americans would like.

Consumer prices climbed 3. 8% year over year in April, while inflation expectations for the year ahead rose to 4. 8% amid growing concerns surrounding the Iran conflict and its potential impact on global energy prices and supply chains (5).

For Americans already grappling with higher prices nearly everywhere they turn, that could put even more strain on household budgets. But even in an uncertain economic environment, there are ways to safeguard your finances. A good starting point?

Reducing costly debt. Get rid of high-interest debt When inflation stays elevated, carrying expensive debt can quietly become even more damaging to your finances. Credit card interest rates are already hovering near record highs and the longer balances sit unpaid, the more costly they become.

That means more of your monthly income goes toward interest charges instead of essentials, savings or investments that can actually help build wealth over time. Consolidating your high-interest debt into a personal loan through Credible can simplify repayment and potentially lower the amount you pay in interest over time. Even better, instead of juggling multiple monthly payments, you’ll have one predictable payment to manage each month.

You can comparison-shop for the lowest interest rates for free on Credible’s online marketplace and find personal loans starting at 5. 96% APR . If you owe a substantial amount, you may also want to see if you qualify for a debt relief program to help clear a significant portion of your debt.

With Freedom Debt Relief, you can speak with a certified debt relief consultant for free , who can show you how much you can save by partnering with them. Invest in inflation-proof assets Once high-interest debt is under control, consider investing in assets that may hold their value better when inflation remains elevated. Unlike paper currencies, precious metals like gold tend to retain intrinsic value over long periods of time.

Plus, the precious metal has also historically been viewed as a lower-risk asset during periods of economic uncertainty and geopolitical tensions. While stocks can swing wildly during uncertain economic periods, gold often moves independently from traditional financial markets, offering another layer of protection when inflation and recession fears rise simultaneously. One way to invest in gold that also provides significant tax advantages is to open a gold IRA through Goldco .

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver . Goldco also offers a buyback guarantee — meaning the company will buy back your gold assets guaranteed at the best available rate if you ever wish to sell.

If you’re on the fence about where gold fits into your financial plan, you can download their free gold and silver information guide today to better understand the potential benefits and any risks. Add real estate to the mix Real estate is another asset class that tends to perform well during inflationary periods because property values and rental income often rise alongside consumer prices. As the cost of living climbs, landlords can typically charge higher rents — helping real estate investments keep pace with inflation over time.

Rental income may provide an additional stream of money that can help offset rising living expenses, particularly during periods when inflation puts pressure on household budgets. The good news is that gaining exposure to real estate no longer necessarily requires buying an entire property outright or taking on the responsibilities of being a landlord yourself. Mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties , which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.

m. tenant calls. Founded by former Goldman Sachs real estate investors, their team handpicks the top 1% of single-family rental homes nationwide for you.

Simply put, you can invest in institutional quality offerings for a fraction of the usual cost. Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.

8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. Offerings often sell out in under three hours , with investments typically ranging between $15,000 and $40,000 per property.

Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake. You can sign up for an account and then browse available properties .

Once you verify your information with their team, you can invest like a mogul in just a few clicks. Those with more capital on hand can expand beyond just vacation and rental properties. Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT , which gives accredited investors access to single-asset multifamily and industrial deals.

Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate. With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000. - With files from Chris Morris.

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