Market has been denial over the “inflation Wolverine”, and may now experience multiple bear market and wild price actions in the future, according to Bill Smead chief investment officer at Smead Capital Management.

It U.S. Federal Reserve on Wednesday struck a hawkish toneIt analyzed how to deal with inflation running at a 40-year high. A central bank statement indicated that the first increase in interest rates might be expected to occur in March.

Market has been mired in volatilityInvestors are trying to determine the extent and pace of monetary tightening so far in this year.

Smead spoke to CNBC’s “Squawk box Europe” on Thursday. He claimed that market complacency was due to the Fed’s failure over the past year to act based on the belief that inflation spikes were “transitory.”

“The market has been denial regarding what we call the “inflation wolverine.” He said that the market was in denial about the “inflation wolverine” and they tried to raise inflation to cure the economic crisis. But inflation isn’t a friendly dog.

Particularly, Smead pointed out that, since the outbreak of the pandemic in 2001, an disproportionately high number of Americans between 30 and 45 years old had started to dream of owning homes and cars and living away from the major coastal cities and commercial centers. Smead argued that the Fed’s “late attack,” will not arrest this paradigm shift.

They let it go too long and now the market is just getting to grips with this. “They’re all still in denial, and they’re just now coming to terms the beginnings of ending their denial,” he stated.

Smead saw parallels in the sequence of macroeconomic events today and the succession of Vietnam War incidents that occurred around 1970. President Lyndon B. Johnson’s “Great Society” — a series of ambitious domestic programs aimed at eradicating poverty and inequality and improving the environment — and the Arab Oil Embargo of 1973.

“We had the Pandemic War, we had Biden’s Great Society“Then the Saudi spring cut off the U.S. Oil industry’s legs by taking the price of oil to zero in April 2020,” said Smead.

“And then you add this large number of people who form households right behind it, and a scarcity of homes and cars. This is the classic definition. Too many people have too much money and chase too few goods.

His firm doesn’t attempt to predict the markets in the near term. However, he said that high price-to earnings ratios and extremely high valuations of growth stocks could indicate that the market is heading for an “extremely challenging period”.

His firm is speculating that it will look like 1970s. It was a bad bear market in 1974, followed by another one in 1982. “There were certain ways to make money but they all were pretty attached to inflation,” he stated.

To put it another way, change the negative thing into the positive. This is what you see in oil prices. It’s also evident in the home price.

Smead claimed that stocks will benefit more from inflation as the pent-up savings go to Main Street instead of Wall Street. This is because they continue to exert upward pressure upon consumer prices.

He stated that there is a shortage of these birds and the ESG feather powder has left them so neglected it will be wild.

“We might see wild price movements in some oil companies, which are trying to make money.”

Smead’s grim outlook on the future is not shared equally by everyone. Luigi Speranza from BNP Paribas was the Chief Global Economist of BNP Paribas. He stated that, while Fed Chair Jerome Powell is now hawkish and French banks are pricing in up to six rate rises this year for their risk-averse behavior, it wasn’t enough to alter its positive outlook for U.S. equity if earnings growth stays strong.