Economist David Rosenberg suggests hyperinflation warnings are irrational.
The longtime bear, known for his contrarian views, blames rising prices on Covid-19-induced supply side shocks. According to Rosenberg, it's wrong to assume the impact will cripple the economy and feed into runaway inflation.
"I'm actually rolling my eyes over the suggestion," the president of Rosenberg Research told CNBC's "Trading Nation" on Monday. "It's totally ridiculous."
Twitter and Square CEO Jack Dorsey is one of the latest corporate executives to sound the alarm on runaway inflation. He pushed out the warning last Friday on Twitter.
"To say that they're [inflation headwinds] not going to be resolved at some point, I think is actually absolving yourself of being respectful of what history tells you," said Rosenberg, who served as Merrill Lynch's chief North American economist from 2002 to 2009.
Rosenberg may be steering clear of the hyperinflation camp, but he's still worried about the markets and economy. He just sees a different kind of problem facing the U.S. economy: deflation.
"What happens when monetary policy shifts and have the stock market and the housing market correcting at the same time? And, this is what's going to be replacing the hyperinflation view in the next year," he said. "People will be surprised as the Fed shifts course and liquidity conditions tighten up. … We're going to end up having asset deflation, and that's going to filter through into generalized deflation in the economy."
He also warns stocks are too pricey right now based on valuations.
"The market has gone up way beyond what should be justified by even strong earnings, and that's because of the Fed," Rosenberg added. "Well, the Fed is about to shift course."
On Monday, the Dow and S&P 500 closed at record highs. The Dow is up 96% since the pandemic low while the S&P 500 has surged 108%.
"As everybody chases the market, my advice is to start taking chips off the table at these levels," Rosenberg said.