More and more strategists believe investors are underestimating the outlook for consumer prices. David Roche, president of investment firm Independent Strategy, is among them. He told CNBC on Wednesday that the U.S. inflation rate, which stood at 2.6 in March from a year earlier, could rise much higher. My own view is that we will see inflation of probably 3 or 4 by the middle of next year and that is completely inconsistent with, say, U.S. 10year bond yields being at 1.6. That yield could easily double, and when it does, then you come to the crunch point that markets are going to experience, he told CNBCs Squawk Box Europe.

The reason prices will rise, and really there are a couple of things, is that youre going to end up with, on the other side of Covid, huge demand as consumers spend the excess savings which they have accumulated, he said. And youre going to end up with big government forever and that of course is less efficient and less efficiency means higher inflation.

Roches comments come amid heightened discussion over the direction inflation will take. Rising inflation is one of the biggest concerns facing the market right now, as high prices could affect asset values and corporate margins and limit consumer buying power. U.S. Federal Reserve officials are keeping an eye on the inflation rate. The latest data shows the consumer price index rose 0.6 in March from the previous month and up 2.6 from a year earlier. Fed policymakers believe a rise is transitory….