"For equities, stocks bottom in front of inflation peaking," he added. "And I think that has occurred. But it's a rocky recovery off those lows, and while I expect the market to end the year higher than where it is today, it's still going to be an underwhelming year for S&P 500 investors."
MSIM has AUM of $1.4 trillion.
"Within their fixed-income allocations, institutional investors tend to have large exposures to core markets, such as Treasuries, agencies, mortgages, and investment-grade corporates," said Mr. Persson of Nuveen. "Further Fed rate hikes, especially 'surprises' vs. market pricing, would likely weigh on these asset classes. We advocate a higher exposure to 'plus' sectors like high yield and loans, which have lower duration, are less exposed to higher rates and have outperformed in these types of environments, including this year so far."
Excluding the volatile food and energy sectors, the core consumer price index rose 6.3% year-over-year in August.
Still, the August consumer price index figure was lower than the 8.5% annual increase reported in July and the 9.1% annual jump recorded in June (which was the highest such annual increase since November 1981).
The August inflation picture was tempered by gasoline prices that plunged 10.6% in August from the prior month, but still climbed by 25.6% over the year-ago period, the report showed. However, food prices rose by 0.8% in August and have climbed 11.4% over the past 12 months.
"Even when you look at core CPI, which is likely more meaningful to the market and the Fed, it was still above expectations," Mr. Wagner added. "It's hard to find anything in this report that was meaningfully down… We're not seeing the pockets that should be cooling off, slowing down at all. So, from a momentum standpoint, we really aren't slowing down (inflation) as expected."
Mr. Nick also noted that "this is a bad report for basically all markets."
"For longer-term investors, a higher plateau for (interest) rates and more near-term market turmoil offers somewhat better entry points," he said. "We're looking at both public and private credit here, as well as municipal bonds, which are extremely rate sensitive but are offering better yields and more durable credit quality than they have for years."